Spin-Off

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.

Example

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.