what is a spinoff 
a spinoff is a new and separate company that s created when a parent company distributes shares in a subsidiary or business division to the parent company shareholders 1 it is a type of divestiture a parent company creates a spinoff expecting that it will be worth more as an independent entity than it was as part of the parent company a spinoff is also known as a spinout or starburst mira norian investopediaunderstanding spinoffsa parent company will spin off part of its business if it expects that it will be lucrative to do so the spinoff will have a separate management structure and a new name but it will retain the same assets intellectual property and human resources the parent company will continue to provide financial and technological support in most cases a corporation creates a spinoff by distributing 100 of its ownership interest in that business unit as shares of stock to existing shareholders it can also offer its existing shareholders a discount to exchange their shares in the parent company for shares of the spinoff for example an investor could exchange 100 of the parent s stock for 110 of the spinoff s stock spinoffs tend to increase returns for shareholders because the newly independent companies can better focus on their specific products or services 