Spinoff
MarketsDefinition
A parent company distributes shares of a subsidiary to existing shareholders, creating an independent public company. Parent shareholders receive shares in the new entity proportional to their parent stake.
Spinoffs historically outperform: less analyst coverage, motivated management with focused mandate, often unloved at distribution because parent-fund holders sell automatically. The "spinoff alpha" is well-documented (Cornell, Coopers & Lybrand) at ~5-10% per year over 1-3 years post-spinoff.
Spinoffs historically outperform: less analyst coverage, motivated management with focused mandate, often unloved at distribution because parent-fund holders sell automatically. The "spinoff alpha" is well-documented (Cornell, Coopers & Lybrand) at ~5-10% per year over 1-3 years post-spinoff.