DEFINITION of 'Demutualization'

When a mutual company owned by its users/members converts into a company owned by shareholders. In effect, the users/members exchange their rights of use for shares in the demutualized company.

BREAKING DOWN 'Demutualization'

A mutual company (not to be confused with a mutual fund) is a company created to provide specific services at the lowest possible price to benefit its users/members. In demutualization, ownership of the mutual company is separated from the exclusive right to use the services provided by the company.

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