IBM Shed Half Its Stake in Kyndryl. The Rest Will Follow Soon.

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IBM

has swapped half of its nearly 20% stake in the managed IT services firm

Kyndryl

to

Goldman Sachs
,
securities filings show.

As part of the IBM (ticker: IBM) spinoff of Kyndryl (KD) completed last November, Big Blue held on to a 19.9% stake, but promised to sell it within 12 months of the completion of the spin. 

Kyndryl shares have struggled mightily in the public market—the stock has fallen by more than 50% since closing the first day of trading at $26.38.

There are several reasons for the weak performance, which go beyond the broad selloff in tech shares. Kyndryl is working to turn around its business, but expects shrinking revenue until fiscal year 2025.

Also, while investors like IBM shares in part for its 4.7% dividend yield, Kyndryl isn’t paying any dividend, which made it either impossible or unattractive for some IBM holders to keep their Kyndryl stake.

Kyndryl also has faced the overhang from the pending sale of IBM’s stake. But the unwinding of that position is now making some progress.

In a recent filing with the SEC, IBM disclosed that it has swapped half of its stake, about 22.3 million shares, along with $46 million in cash, to Goldman Sachs, in exchange for the extinguishment of a $357 million short-term credit facility. Goldman, in turn, filed with the SEC to disclose the position, and has since sold a small portion of the shares.

“Consistent with our stated intentions at the time of the separation of Kyndryl, IBM has begun to sell its retained stake in Kyndryl,” IBM confirmed in a statement. “This initial transaction addresses half of our holdings. It remains IBM’s intention to sell its remaining stake within 12 months of the November 3, 2021 Kyndryl separation date.”

It could take some time for the market to completely absorb the shares held by IBM, and now Goldman. Together, they total close to 45 million shares, or more than 20 days of average trading volume in Kyndryl shares.

On Thursday, Kyndryl is up 3.4%, to $12.69.

Write to Eric J. Savitz at [email protected]