Glossary · Defined term
Spin-off
A spin-off separates part of a company into an independent, publicly traded company, with shares given to existing holders.
Last updated Oct 2, 2026
What it means
A spin-off is a corporate action in which a company separates part of its business into an independent, publicly traded company. Existing shareholders typically receive shares of the new company pro rata, so a holder of the parent automatically becomes a holder of the spin-off. Companies do this to let each business focus on its own strategy, unlock value the market was not recognizing, or shed a division that no longer fits. Many spin-offs are structured to be tax-free to shareholders if they meet IRS requirements. After the split, the two companies operate, report, and trade separately.
An example
For illustration, a conglomerate spins off its fast-growing software division. Shareholders receive one share of the new software company for every ten shares of the parent they own. The parent keeps its industrial businesses, the software unit gets its own management and stock ticker, and each can now be valued on its own merits.