why spinoffs happen
a spinoff may occur for various reasons but the overall belief is that it will be more profitable as an independent entity than it was as a part of the parent company and the parent company may then be better positioned to achieve greater value as well both the parent company and the spinoff tend to perform better as a result of the spinoff transaction with each now able to focus more effectively on its core competencies risks of spinoffsthe downside of spinoffs is that their share price can be more volatile and tend to underperform in weak markets and outperform in strong markets spinoffs can also experience high selling activity initially parent company shareholders may not want the shares of the spinoff they received because the spinoff may not fit their investment criteria the share price may dip in the short term because of this selling activity even if the spinoff s long term prospects are positive examples of spinoffsspinoffs are a common occurrence typically dozens are created each year in the united states examples include the spinoff of smith wesson inc from american outdoor brands corp and the separation of paypal inc from its parent company ebay inc 23in addition in early 2023 general electric spun off its healthcare division ge healthcare technologies and jefferies financial group spun off its holdings of vitesse 45