What Is a Stock Spinoff?

By Jeremy Bowman – Updated Dec 31, 2024 at 4:58 PM

Key Points

Stock spinoffs split a company to form new firms, aiming to boost shareholder value.
Investors receive shares in the new entities, which adjusts the market cap of the original firm.
Spinoffs can simplify business structures for clearer valuation and strategic focus.

Publicly traded companies are never standing still. They're always looking for new ways to grow, whether that's through new product categories, new geographies, or even an acquisition.

However, major corporations also make other moves to create shareholder value, including divesting themselves from subsidiaries or secondary brands or even spinning them off into a separate company, which is sometimes known as a stock spinoff.

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Stock

A stock represents an ownership interest in a business. When a business wants to raise money, its board of directors determines the number of shares to issue.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in GXO Logistics, RXO, Walt Disney, and XPO. The Motley Fool has positions in and recommends 3M and Walt Disney. The Motley Fool recommends GE Aerospace, GXO Logistics, International Business Machines, Johnson & Johnson, RXO, and XPO. The Motley Fool has a disclosure policy.