What happened
The share price of Jefferies Financial Group (JEF +3.87%) jumped higher this week, rising 10.7% from last Friday's close through 12:10 p.m. EST on Friday, according to S&P Global Market Intelligence. The stock is trading at about $37.75 per share and is down roughly 6.1% over the past year, as of Jan. 6.
Jefferies' gains came within a flat week for the markets as the S&P 500 was up 1%, the Dow Jones Industrial Average gained 1.2%, and the Nasdaq Composite was up 0.3% for the week.
So what
Jefferies got a bump this week after it announced the distribution date for the dividend of Vitesse Energy, which it is spinning off. Vitesse is one of the last vestiges of Leucadia National, a baby Berkshire Hathaway that merged with Jefferies in 2012.
The dividend will be distributed effective Jan. 13 to Jefferies investors who were shareholders as of Dec. 27, 2022, the record date for the distribution.
NYSE: JEF
Key Data Points
On the distribution date, each Jefferies shareholder will also receive, for every 8.49668 Jefferies shares, a distribution of one share of Vitesse common stock. Fractional shares will not be distributed to Jefferies shareholders: rather, they will be sold on the open market, with proceeds distributed in cash payments to Jefferies fractional shareholders.
The Vitesse Energy spinoff was due to occur by the end of 2022, but it appears that it will now happen sometime this year. The move is part of Jefferies' plan to focus solely on its core businesses of investment banking and capital markets.
In a press release, Jefferies CEO Rich Handler and its president, Brian Friedman, said:
Consistent with our priorities to simplify and focus our business model and corporate structure, as well as to continue to return capital to shareholders, we are pleased to be proceeding with the Vitesse spinoff. We are excited for Vitesse to be an independent, publicly traded company, and believe that Vitesse has a strong asset base and tested business model, which we expect will position Vitesse to return significant capital to its stockholders. We each look forward to being stockholders of Vitesse and to seeing its success in the coming years.
Now what
The market has generally reacted favorably to Jefferies' plan to spin off or divest itself of its former Leucadia properties. But it was a difficult year for the investment banking industry, and that environment probably won't improve much in 2023, certainly in the first half of the year, given expectations of an economic slowdown, combined with the likelihood of rising interest rates.
But Jefferies posts its fiscal fourth quarter, ended Nov. 30, and fiscal year-end earnings on Jan. 9, so stay tuned for those results and any new guidance or insights for 2023.
