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A spin-off occurs when a parent company creates a new independent company by separating part of its business into a new entity. Shareholders of the parent company typically receive shares in the new company. Spin-offs are often used to improve operational efficiency, unlock value for shareholders, or allow the spun-off unit to focus on its core business activities independently from the parent company.
A large tech company may spin off its cloud computing division into a separate company, giving its shareholders shares in the new cloud entity while continuing its other operations independently.
• Creation of a new independent company from part of a parent company.
• Shareholders of the parent receive shares in the new entity.
• Often done to unlock value or improve business focus.
They aim to unlock value, improve operational focus, or allow each company to operate more efficiently.
Shareholders receive shares in the newly created company, potentially increasing their overall investment value.
It may face operational challenges as it adjusts to operating independently, including establishing its own management, branding, and strategy.
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