What is SEC Form 10-12B
BREAKING DOWN SEC Form 10-12B
SEC Form 10-12B includes a letter from the parent company to shareholders explaining the reason for the spin-off as well as pro forma financial statements showing how the spin-off would have performed in the past if had already been an independent entity. The form also includes details about how the new company will operate, the potential strengths and weaknesses of the new company' and the outlooks for new company's industry.
Companies often do spinoffs for strategic reasons. Spinning off a subsidiary may help management focus on their core business, allowing the spinoff to become the focus of attention and resources under its new management. This may allow the subsidiary to more fully realize its potential value for shareholders. Spinning off a subsidiary may also allow the parent company to more fully realize its value if the spun-off subsidiary was in a slow growth industry that created a drag on parent company earnings. Selling off a subsidiary may also be used as a takeover defense, potentially making the parent company less attractive to suitors.