We also discuss the dimensions on which Targeted Stock, spin-offs,
equity carve-outs, and dual class common stock differ, thus highlighting management considerations when choosing among the various forms of equity reorganization.
Schipper and Smith (1983 and 1986) document positive market reactions to the announcements of both
equity carve-outs and spin-offs of corporate as sets.
US companies have used
equity carve-outs (partial IPOs) as a reorganization tool for some time to unlock subsidiary values and to increase the parent's corporate focus or to create a pure play for the subsidiary.
We examine the efficiency of initial public offering (IPO) pricing using a sample o[over 300
equity carve-outs from 1985 to 2009.
Hand and Skantz (1998) argue that issuing new shares in
equity carve-outs can avoid tax liabilities that occur when a firm issues secondary shares (at a price above the firm's tax basis in the shares).
For a sample period 1980 through 1991, the authors found that
equity carve-outs were associated with significantly negative abnormal returns to other industry members.
In addition to providing clear intuition and real-life examples, this chapter also links academic research on management buy-outs,
equity carve-outs, and tracking stock to the question of how best to align shareholder and manager interests.
Spin-offs,
equity carve-outs, and initial public offerings have slowed down from their heyday in the 1990s, but these transactions will surely come into vogue again, since they can create lasting value when done right.
The results suggest that
equity carve-outs are an effective way for companies to exploit growth opportunities and increase shareholder value.
The
equity carve-outs in Tokyo work if the pricing of the U.
Thus, it is possible that share overhang may be systematically different for
equity carve-outs as opposed to traditional IPOs.
