Kenvue Inc., the consumer-focused spinoff of Johnson & Johnson that owns brands such as Band-Aid and Tylenol, fell on Thursday after J&J said it’s preparing to launch an exchange offer for its majority stake.

Shares of Kenvue sank as much as 10%, the most since the company started trading publicly in May, in New York trading. J&J Chief Financial Officer Joe Wolk said during a call with analysts that the exchange offer will depend on market conditions and it could begin in “the coming days.”

J&J still holds nearly 90% of Kenvue’s shares, and the exchange offer would lead to dilution, potentially reducing the value of existing investors’ shares and their proportional ownership of the company.

The J&J comments are “stoking uncertainty” in the market, said Bloomberg Intelligence analyst Diana Gomes, given the company acknowledged that “it may have to sit with a large stake after the share exchange.”

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Kenvue, whose offering broke a long lull in large US listings, reported second-quarter earnings earlier on Thursday. The company has said it’s trying to improve its margins by making its supply chain more efficient.

Prior to J&J’s announcement, Kenvue Chief Executive Officer Thibaut Mongon said that a slow economic recovery in China is hurting sales.

“We saw some softness in Asia this quarter,” Mongon said in an interview, with China’s slow recovery contributing to volume declines in the essential health category, which includes oral care, baby and wound care.

“We were never in the camp of those who thought that China would recover overnight,” Mongon said. “We know this market very well, and we thought that the recovery would be gradual, and that’s what we see happening.”

There’s concern that shoppers globally are pulling back amid high levels of inflation and slowing economic activity, and Kenvue’s results are another sign of weakness in Asia. The company’s earnings per share and revenue topped estimates, but sales volume declined 1.7% for the quarter ended July 2, showing that consumers are buying fewer units.

“More needs to be done in terms of investment in advertising,” Gomes said. She added the company needs to be “catching up on distribution, as service levels with retailer clients are still not where they should be.”

--With assistance from Bailey Lipschultz.

(Updates with analyst’s comments in fourth paragraph; adds chart)