Split-Off

What is a 'Split-Off'

A split-off is a means of reorganizing an existing corporate structure in which the stock of a business division, subsidiary or newly affiliated company is transferred to the stockholders of the parent company in exchange for stock in the latter. Split-offs often occur when the parent company wishes to draw a greater distinction between itself and the split-off business.

BREAKING DOWN 'Split-Off'

It is probably wise to treat split-offs with suspicion, as companies will often use them to bolster the balance sheet by shedding underperforming or unprofitable divisions and/or subsidiaries. For example, when Blockbuster started feeling the pinch from other, cheaper DVD retailers and cable companies offering video-on-demand and easy video recording, Viacom announced plans to split-off of its 81.5% stake in the one-time video rental giant and was even willing to absorb a $1.3 billion charge to do it. The split-off was completed in 2004. On Sept. 23, 2010, Blockbuster filed for Chapter 11 bankruptcy protection.

RELATED TERMS
  1. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
  2. Affiliated Group

    Two or more corporations that are related through common ownership, ...
  3. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  4. Tracking Stock

    1. Common stock issued by a parent company that tracks the performance ...
  5. Parent Company

    A company that controls other companies by owning an influential ...
  6. Minority IPO

    An initial public offering in which a parent company spins off ...
Related Articles
  1. Investing

    Comparing Spin-offs, Split-Offs and Carve-Outs

    Spin-offs, split-offs and carve-outs are three methods a company can use to divest certain assets, a division or a subsidiary. Here's how they differ.
  2. Investing Basics

    Explaining Affiliate, Associate And Subsidiary

    Affiliate, associate and subsidiary are all terms referring to the degree of ownership a parent company holds in another company.
  3. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  4. Economics

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.
  5. Economics

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  6. Investing

    Chapter 11 Bankruptcy: Is It Better To Be a Stockholder or Bondholder? (BTU)

    Discover why energy companies are struggling to stay solvent, while examining the basics of Chapter 11 bankruptcy and its effect on stock and bond holders.
  7. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  8. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  9. Retirement

    Helping Aging Parents Manage Their Money

    Old age can make dealing with finances difficult. Find out how you can help aging parents manage their finances and estates.
  10. Financial Advisors

    Top Financial Planning Issues for Older Parents

    Clients who have children later in life present an opportunity for advisors. Here are the key the financial planning issues that need to be addressed.
RELATED FAQS
  1. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Answer >>
  2. What is the difference between a subsidiary and a sister company?

    Discover the differences between subsidiary companies and sister companies, and understand how both are related to parent ... Read Answer >>
  3. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Answer >>
  4. What is the difference between a subsidiary and a wholly owned subsidiary?

    Understand the primary differences between a subsidiary company and a wholly owned subsidiary, and their relationship to ... Read Answer >>
  5. How do spinoffs impact investors in the both the parent and subsidiary companies?

    Learn about how spinoffs affect investors in both the parent company and the subsidiary and what strategies investors use ... Read Answer >>
  6. How is taxation treated for both the parent and subsidiary company during a spinoff?

    Learn how the potential tax implications of a spinoff can affect both parent and subsidiary companies and how taxes may be ... 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