Investing term

What is Carve-out?

A parent company sells part of a subsidiary in an IPO, keeping a stake.

A carve-out is when a parent company sells a minority stake in one of its subsidiaries to the public through an IPO, while keeping control. It lets the parent raise cash and put a market value on the unit without fully letting go. Investors sometimes watch carve-outs because the smaller, focused business can be valued differently than it was buried inside the parent.

For example

A conglomerate floats 20% of its fast-growing tech division on the market, keeps the other 80%, and pockets the cash from the shares it sold.

Carve-out is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

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Related terms

AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.Deal spreadThe gap between the announced deal price and the live market price of the target's stock.
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