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A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


A situation in which a company offers stock in one of its wholly-owned subsidiaries or dependent divisions such that subsidiary or division becomes an independent company. The parent company may or may not maintain a portion of ownership in the newly spun-off company. A company may conduct a spin-off for any number of reasons. For example, it may wish to divest itself of one industry so it can expand into another. It may also simply wish to profit from the sale of the subsidiary. A spin off should not be confused with a split off.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


In a spin-off, a company sets up one of its existing subsidiaries or divisions as a separate company.

Shareholders of the parent company receive stock in the new company based on an evaluation established for the new entity. In addition, they continue to hold stock in the parent company.

The motives for spin-offs vary. A company may want to refocus its core businesses, shedding those that it sees as unrelated. Or it may want to set up a company to capitalize on investor interest.

In other cases, a corporation may face regulatory hurdles in expanding its business and spin off a unit to be in compliance. Sometimes, a group of employees will assume control of the new entity through a buyout, an employee stock ownership plan (ESOP), or as the result of negotiation.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
On the right extremity is another small off-shoot of the cottage-cluster - Westbury Terrace.
Athole McKillop, director of Land Factor North-East, said: "It's great news for rural communities that something which is found naturally plentiful in the countryside is set to cause a boom regionwide, help reduce carbon emissions and could lead to future jobs from new businesses and off-shoots.
Speaking after the Wales and Liverpool striker was cleared of assaulting two women at a Cardiff nightclub he told the Echo: 'I suppose that it is one of the off-shoots of the ever increasing celebrity culture.
After flowering, many of the bromeliads produce off-shoots. When these have produced leaves about four inches long, cut them off close to the mother plant and then pot them up in an all-purpose, acidic potting compost.