A spin off represents the establishment of a distinct and independent entity, which arises from the distribution of subsidiary or business division shares to the shareholders of the parent company. This strategic maneuver is considered a form of divestiture, wherein the parent company anticipates that the spin off will achieve a higher valuation as a standalone entity, surpassing its value while operating under the parent company’s umbrella. Effectively, the spin off creates additional value for shareholders when they receive the dividend of shares in the new entity.

The terms “spinout” or “starburst” are alternative designations for a spin off.