A spin-off is when a division or subsidiary of a company is separated from the parent corporation and starts to offer its own shares.
The term can also colloquially refer to a situation where a group of talent leaves the larger company to start their own firm doing similar work as they used to do. As far as the SEC is concerned, the definition of a spin-off must include the shareholders of the parent corporation being offered a substantially proportionate amount of shares in the new company.
A corporation might decide to do a spin-off for a number of reasons. One could be that the subsidiary or division is not as integrated with the rest of the corporation as they would like, from an efficiency standpoint or a branding standpoint, and they might decide that both entities would be more likely to thrive separately.
It has been said that the price of a corporate conglomerate’s shares is actually discounted from the sum of its parts, and if investors see value in that, the spun-off company would be able to raise a substantial amount of new capital in their initial offering, which is called an equity carve-out IPO.
In a carve-out the parent company is basically giving up their shares and offering them to the public. A split-off is one in which equity in the spun-off company is offered in exchange for shares of the parent company, at a discount, which is called an exchange offer.
In some situations a spin-off will be run by practically the same shareholders and management, but in others the spin-off will be revamped with a majority of new board members and management. Some are effectively a technology transfer from the parent to a new entity, and in some cases the parent might be a university or other academic institution.
There are different reasons for using any of the above strategies in different situations, tax considerations being not the least among them.
Bond insurance is a contract that protects the issuer and the holder of bonds from the risk that bond payments will...
Mutual funds are actively managed. ETFs are mostly passively managed, usually track a specific market index, and can be bought and sold like stocks.
A 403(b) Plan is essentially a 401(k) for publicly-funded institutions such as public schools, universities, certain hospitals, and non-profit organizations.
Investing in a 403(b) is done by making contributions via payroll deductions and selecting investment options
Learn to navigate the nuances of asset allocation in retirement with our comprehensive guide. Discover how to balance growth and risk for a secure retirement.
Generally this won’t be an option that your plan allows, but the IRS has approved it if the employer wants to
A spin-off is when a division or subsidiary of a company is separated from the parent corporation and starts its own
The Broadening Bottom pattern forms when a currency pair price makes higher highs and lower lows following two widening trends
Quotes are current pricing information about individual securities on an exchange. A potential investor will refer to...