In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who writes:
I am curious about National Oilwell Varco's (NYSE:NOV) spin-off and what I should do beforehand. Should I buy more shares now and hope the spin-off, pays off. Or hold on to what I have and invest somewhere else? I do not know much about spin-offs so any advice would be appreciated.
Jason explains that, in this case, on the day of the spinoff, owners of National Oilwell Varco will see their shares split into two, with one share representing National Oilwell Varco and the other share representing the new distribution business that the company is spinning off, which will be called DistributionNow. Spinoffs are often tax-efficient, shareholder-friendly ways for companies to pursue a given strategy. In this case, it will allow both businesses to function independently doing what they both do best. Jason also believes that DistributionNow will be a compelling holding with consolidation in the industry forthcoming, and investors would be wise to hold onto their shares, even if there is some short-term selling due to the smaller size of the new company.