Investing term

What is Spin-off?

A parent company distributes the shares of a subsidiary to existing holders, creating a separate listed company.

A spin-off is when a parent company hands shares of one of its divisions to existing shareholders, creating a separate, independently listed company. You end up owning two stocks where you had one. Spin-offs sometimes unlock value, as a division freed from a sprawling parent can be run and valued on its own merits — and they're a classic hunting ground for investors.

For example

A conglomerate spins off its consumer brand into a standalone company; you keep your parent shares and receive shares in the new spin-off too.

Spin-off 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.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.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.
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