S&P Global Investors May Be Getting a "Buy One, Get One Free" Deal

Most investors know S&P Global (NYSE: SPGI) as one of the world's leading credit rating businesses.

But over the years, the company has evolved into something more than that. Today, S&P Global spans benchmark indexes, commodity intelligence, enterprise analytics, and automotive intelligence through its Mobility division.

And that last segment may be creating an interesting opportunity for shareholders. Why? Because S&P Global is preparing to spin off its Mobility business into a separate publicly traded company.

In many ways, investors may effectively be getting a "buy one, get one free" deal: ownership in S&P Global's core financial infrastructure platform, while also receiving exposure to a stand-alone automotive intelligence business that the market may not yet fully appreciate.

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S&P Global has quietly evolved far beyond ratings

For years, S&P Global's identity was tied closely to credit ratings. That business still matters enormously today. Whenever corporations or governments issue bonds, investors often rely on S&P's ratings to evaluate risk.

But the company has gradually transformed into something much larger. Today, S&P Global also owns benchmark index businesses tied to trillions of dollars in exchange-traded funds (ETFs) and passive investment products. It operates major commodity pricing platforms and enterprise analytics systems used throughout global financial markets.

In other words, the company has built an ecosystem deeply embedded in capital markets, investment workflows, and institutional decision-making. That creates an unusually strong business model.

For instance, as passive investing continues to expand globally, S&P benefits from licensing revenue tied to its index platforms. Similarly, as financial markets grow and become more complex, demand for ratings and financial analytics tends to rise.

Importantly, many of these operations generate recurring revenue, have high switching costs, and exhibit strong operating leverage. That is why S&P Global increasingly resembles less of a traditional financial company and more of a long-term financial infrastructure.

The spin-off could unlock hidden value

The Mobility business adds another layer to the long-term growth story.

Originally built through the IHS Markit acquisition, S&P Global Mobility provides automotive data, software, and analytics to automakers, suppliers, insurers, and dealers worldwide.

As the automotive industry becomes increasingly driven by software, connectivity, electrification, and data, vehicles themselves are evolving into more technology-intensive platforms, creating rising demand for industry intelligence and analytics. That trend sets up the Mobility business for sustainable growth in the years to come.

Inside S&P Global, however, Mobility may not receive the type of valuation investors typically assign to stand-alone software or data businesses. Besides, the existing management team may not have enough bandwidth to give this business the attention it needs.

That is where the spin-off becomes a compelling move. Historically, stock spin-offs have often unlocked shareholder value because markets tend to undervalue complex companies operating multiple businesses under one structure. Investors frequently apply a blended valuation that fails to fully recognize the strengths of each segment independently.

After the separation, the market may begin valuing these businesses differently. The core S&P Global business could emerge as a cleaner, more focused platform centered on ratings, indexes, analytics, and market intelligence.

At the same time, Mobility may gain greater visibility as a stand-alone business with its own growth profile.

What does it mean for investors?

So far, Wall Street seems to be giving little credit to this corporate exercise. In fact, the share price has fallen by about 25% during the past 12 months.

On one level, many investors continue treating the company primarily as a credit rater. But beneath the surface, the business has quietly been riding several long-term trends, including passive investing, financial data analytics, commodity intelligence, and the growing complexity of global capital markets.

But the same evolution has made it difficult for investors to understand the company's long-term prospects.

Thus, the Mobility spin-off may help simplify the whole group, making it easier for investors to value both businesses separately. And if that happens, shareholders today may end up owning two potentially valuable businesses.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.