Spin-Off
A spin-off is a type of corporate action where a company creates a new business entity by distributing shares of an existing business or division to its shareholders. The new business entity is then separately owned and operated from the original company. Spin-offs are often used to separate a company’s core business from its non-core operations, or to unlock value from a business unit that is not performing as well as the rest of the company. Spin-offs can also be used to create a new company with a different focus or to raise capital for the original company.
History of Spin-Offs
The concept of spin-offs has been around since the early 1900s, when companies began to separate their core businesses from their non-core operations. This allowed companies to focus on their core businesses and to raise capital for the original company. In the 1950s, spin-offs became more popular as companies began to use them to unlock value from underperforming business units. In the 1980s, spin-offs became even more popular as companies began to use them to create new companies with different focuses.
Comparison Table
| Type of Corporate Action | Spin-Off | Divestiture |
|---|---|---|
| Definition | A corporate action where a company creates a new business entity by distributing shares of an existing business or division to its shareholders. | A corporate action where a company sells or disposes of an existing business or division. |
| Purpose | To separate a company’s core business from its non-core operations, or to unlock value from a business unit that is not performing as well as the rest of the company. | To raise capital, reduce debt, or focus on core operations. |
Summary
A spin-off is a type of corporate action where a company creates a new business entity by distributing shares of an existing business or division to its shareholders. Spin-offs are often used to separate a company’s core business from its non-core operations, or to unlock value from a business unit that is not performing as well as the rest of the company. For more information about spin-offs, you can visit websites such as Investopedia, The Balance, and The Motley Fool.
See Also
- Divestiture
- Merger
- Acquisition
- Joint Venture
- Stock Split
- Reverse Stock Split
- Rights Issue
- Share Buyback
- Tender Offer
- Going Private
