GE's plan to split into three companies and Johnson & Johnson's plan to split into two companies has re-opened the discussion on the pros and cons of spinoffs from the standpoint of shareholders. Breaking apart a company can, in theory, unlock value. Corporate spinoffs as an asset class have done well historically. Value investor Joel Greenblatt highlighted the opportunity for the masses in his book "You Can Be a Stock Market Genius." Several studies using data from the 1990s through the middle of the last decade have shown that a portfolio of spinoffs can beat the market by 10 to 15 percentage points in the year after they go public.

Managers of a newly public company are more focused, and valuations often rise to reflect those of peers. But, as this article explores, there are catches So, why have spinoffs historically outperformed the market? More recently, spinoffs have lagged the broader market. Why?