Wesfarmers Ltd (ASX:WES) share price plummets 30% as spinoff Coles hits the ASX boards

The Wesfarmers Ltd (ASX:WES) share price has plummeted after spinoff Coles hits the ASX boards…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Coles Group Limited (ASX: COL) share price has hit the ASX boards this morning and is currently priced at $12.58

Analysts had been tipping a price of $13.00 to $14.00 for the supermarket giant's shares, so investors will be reasonably pleased with this outcome given the market selloff today.

Going the other way this morning is of course the Wesfarmers Ltd (ASX: WES) share price. It is down a massive 30% in early trade after investors revalued its shares to reflect the absence of the Coles business.

Once again, I think this is a decent outcome for shareholders. I estimate that this has wiped almost $15 billion off the Wesfarmers market capitalisation today, whereas the Coles market capitalisation currently stands at ~$16.8 billion.

Should you invest in either business?

Wesfarmers' performance will now be largely reliant on the success of its Bunnings business. While I've been pleased with what I've seen from Bunnings and think it is one of the highest quality retailers in Australia, it will be interesting to see how it fares during the housing market slowdown.

Some believe it will be negatively impacted by the housing market weakness, whereas others have predicted that it will benefit as consumers focus less on buying and selling houses and more on renovating them.

In addition to this, all eyes are on what Wesfarmers does next. The company has money to spend and this could have a major impact on investor sentiment.

Fletcher Building Limited (ASX: FBU) has been tipped as a potential target in the past. So, with its shares crashing to a 52-week low today, perhaps it will be on the company's radar again.

What about Coles?

I like Coles and believe it could be a good option for investors looking at low risk and stable options. However, it might be worth waiting to see how the supermarket performs over the all-important Christmas period before considering an investment.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Woman in celebratory fist move looking at phone
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX 200 shares could rise 20% to almost 30%

Analysts are tipping these shares to deliver big returns over the next 12 months.

Read more »

A young woman carefully adds a rock to the top of a pile of balanced river rocks.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

Energy and utilities stocks led the way last week with 4%-plus gains.

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will now cut interest rates

Will borrowers need to wait until the middle of next year for relief? Let's find out.

Read more »

Boys making faces and flexing.
Opinions

3 ASX 300 shares to buy and hold for the long run

I believe these stocks have loads of growth potential.

Read more »

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »