EchoStar Holding’s (NDAQ:SATS) spin-off from EchoStar Communications (NDAQ:DISH) made a spectacular debut this week as investors hope that the breakup will help Wall Street assign more accurate values to the newly divided companies, especially their non-satellite operations. The transaction should also allow for better incentivization for employees, greater operating efficiencies, and better access to financing. Shareholders are hoping that these factors will help boost the share price of the new companies.

The new spin-off SATS is poised to close out the week with a market cap of around $2.9 billion after jumping more than 70 percent on its debut. This would more than compensated for the 5.5 percent drop in DISH shares and create a combined market cap of around $18.6 billion, compared to $16.9 billion before the breakup. This illustrates that value has already been created for shareholders by the spin-off – in fact, substantial value of over 10 percent!

Rumors of a possible AT&T buyout of the Dish Network made its rounds this fall, but this new spin-off all but diminishes that possibility. However, the rumored buyout may have given investors an idea of pricing after some speculated AT&T would be willing to pay upwards of $56 per share for the combined company. This would have valued it at roughly where it is at now, suggesting that the spin-off was a success.

In the end, this is all great news for shareholders who have already realized a substantial gain in their investment through the spin-off. Meanwhile, spin-offs themselves have been shown to outperform the overall market during their first few years as a separate company, which is only good news. Combined, these factors make SATS a stock worth watching!

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