A spin-off is when a company separates one of its business divisions or subsidiaries into an independent, publicly traded company. Existing shareholders usually receive shares in the new independent company automatically. The parent company and the new company now operate separately with their own management and stock prices. This allows investors to own and value each business on its own.
TechCorp owns both a cloud computing division and a hardware division. The company decides to spin off the hardware division into a separate company called HardwareCo. Existing TechCorp shareholders receive one share of HardwareCo for every five TechCorp shares they own. Now investors can buy just TechCorp, just HardwareCo, or both independently.
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