History Cautions That Keurig Dr Pepper Spin-Off Returns Could Fizzle

Warren Buffett has long criticized the machinations of investment bankers, particularly the fees they earn from deals. Buffett is likely rolling his eyes again.

On Monday, Keurig Dr Pepper Inc. (KDP) announced its intention to acquire JDE Peet’s N.V. (JDEPY), which owns Peet’s Coffee. Once the acquisition is completed, the merged company will split into two parts: Global Coffee Co. and Beverage Co. The planned breakup will end a corporate marriage between Keurig and Dr Pepper that started in 2018.

Keurig Dr Pepper claims this move will benefit shareholders. Whether it actually will is a big question mark. The data I found on corporate spin-offs paints an inconclusive picture regarding returns. But first let’s look at an exchange-traded fund (ETF) that invests in spin-offs before discussing the academic research.

The Invesco S&P Spin-Off ETF (CSD) tracks the S&P U.S. Spin-Off index. This index tracks U.S. companies that have been spun off from a parent company within the last four years. Such companies must have a float-adjusted market capitalization of $1 billion. (Float refers to shares that are available for trading.)

Through July 31, 2025, Invesco S&P Spin-Off has a five-year annualized return of 17.7%, versus 15.0% for the broader market index iShares Russell 3000 ETF (IWV). Invesco S&P Spin-Off lags iShares Russell 3000 on a 10-year annualized basis: 7.7% versus 12.8%, respectively.

A 2023 review of 89 studies on spin-offs published between 1976 and 2021 found mixed results. Spin-offs created wealth for shareholders around the date when the corporate splits were announced. “With regard to the long-term performance of spin-offs, there is inconclusiveness,” wrote the review’s authors. “While some studies claim that spin-offs result in the long-run outperformance of the concerned entities’ stocks … others rule out this statement by not finding any evidence in its support.”

Three partners at consultancy firm Bain & Co. Inc. looked at more than 350 spin-offs valued at over $1 billion between 2000 and 2020. They found “the average separation delivered as little as a 5% increase in combined market cap two years after spinning off.” Worse yet, 25% of spin-offs destroyed “a significant amount of shareholder value in the process.” Yikes!

There were big winners too. The corporate separations ranking in the top 25% of returns realized a 75% increase in market cap. What set these companies apart was “the existence of a clear and robust separation thesis.” Such theses specify the value each company will create (e.g., annual growth metrics), financial targets and clear separation lines between split companies.

Determining whether any spin-off is a good investment opportunity requires going through company presentations and filings with the U.S. Securities and Exchange Commission (SEC). While such work may be rewarded, you will also find yourself saying “pass” quite often.