Bifurcation

DEFINITION of 'Bifurcation'

The splitting of a larger whole or main body into two smaller and separate units. Bifurcation can occur when one company divides into two separate divisions, thereby creating two new companies that can each issue shares to stockholders. Shareholders in the initial company are given shares of the new company through a corporate reorganization. Companies may seek bifurcation for certain tax advantages.


Bifurcation also refers to the analysis or evaluation of market conditions based on two distinct scenarios.

BREAKING DOWN 'Bifurcation'

Bifurcation, as it relates to finance, usually refers to the dividing of one company into two separate companies. This can provide tax advantages to the company as well as increased financial opportunities for shareholders. The term bifurcation has other applications in law, hydrology, fluid dynamics, mathematics, economics, chemistry, anatomy and physiology. In each application, bifurcation refers to the splitting in two of a certain element or system, such as the splitting of a single hydrogen atom participates into two hydrogen bonds.

RELATED TERMS
  1. Split-Up

    A corporate action in which a single company splits into two ...
  2. Stock Split

    A corporate action in which a company divides its existing shares ...
  3. Reverse Stock Split

    A corporate action in which a company reduces the total number ...
  4. Shareholder

    Any person, company or other institution that owns at least one ...
  5. Split Adjusted

    A modification made to a security's price that takes into consideration ...
  6. Reverse/Forward Stock Split

    A stock split strategy that includes the use of a reverse stock ...
Related Articles
  1. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  2. Investing Basics

    What Are Corporate Actions?

    Corporate actions are processes that change a company’s stock. Here are a few examples.
  3. Investing Basics

    Stock Splits: A Closer Look At Its Effects

    Most trades, including short sales and options, aren't materially affected by a stock split. Still, it's important for shareholders to understand how these events impact various aspects of investing. ...
  4. Investing Basics

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  5. Investing Basics

    Who is a Shareholder?

    A shareholder is a person, company or other entity that owns at least one share of a company’s stock.
  6. Fundamental Analysis

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  7. Investing

    Understanding Stock Splits

    Find out how stock splits work and how they affect investors.
  8. Investing Basics

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
  9. Trading Strategies

    If You Had Invested Right After Apple's IPO

    Learn about how much a $1,000 investment in shares of Apple Incorporated would be worth if you invested at its initial public offering price.
  10. Term

    What Is Stockholders' Equity?

    Stockholders’ equity represents the equity that shareholders own in a company.
RELATED FAQS
  1. How and why does a stock split?

    Learn why stock splits do not occur very often for individual stocks, and understand the impact of reverse stock splits on ... Read Answer >>
  2. What are reverse stock splits?

    A reverse stock split is a corporate action in which a company reduces the number of shares it has outstanding by a set multiple. ... Read Answer >>
  3. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Answer >>
  4. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Answer >>
  5. Can a mutual fund's shares split?

    Learn about mutual fund share splits and why they occur, including how splits and reverse splits affect share price and total ... Read Answer >>
  6. Why would a company perform a reverse stock split?

    Understand what a reverse stock split entails, and learn what the common motivations are for a company to perform a reverse ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center