Often, the parent company starts by selling a portion of the new company to the public, to establish a market and a following among investors. That way, by the time of the spin-off, stock in the new company may be liquid enough to be sold relatively easily, or retained with some confidence as a worthwhile investment.
In our experience, and in most academic studies of the subject, this helps the parent and its corporate spinoff. Both generally do better than comparable companies for at least several years after the spinoff takes place.
When a company carries out a spinoff, it sets up one of its subsidiaries or divisions as a separate company, then hands out shares in the new company to its own shareholders. It may hand out the shares as a special dividend, or give its shareholders an opportunity to swap shares of the parent company for the shares of the newly established spinoff.
Study after study has shown that after an initial adjustment period of a few months, stock spinoffs tend to outperform groups of comparable stocks for several years. (For that matter, the parent companies also tend to outperform comparable firms for several years after a spinoff.) The above-average performance of spinoffs makes sense for a couple of reasons.
First, company managers naturally prefer to acquire or expand their assets, not get rid of them. Getting rid of assets reduces a company’s total potential profit. The management of a parent company will only hand out a subsidiary to its own investors if it’s nearly certain that the subsidiary, and the parent, will be better off after the spinoff than before.
Second, spinoffs involve a lot of work and legal fees. Companies only have an incentive to do spinoffs under two sets of favourable conditions: When they feel it isn’t a good time to sell (which often means it’s a good time to buy); or, when they feel the assets they plan to spin off will be worth substantially more in the future, possibly within a few years.
Quite often, a big company will spin off a small subsidiary because it feels the subsidiary is a tiny gem, but that it’s too small to make an impact on the much larger financial statements and market capitalization of the parent.
At TSI Network we’ve had great success with a number of spun off stocks over the years. That’s especially true of the many spinoffs we have recommended that have gone up after they began trading, and have later attracted a takeover bid at a substantial premium over the market price.
Needless to say, things don’t always work out this well. Spinoffs and their parents do sometimes run into unforeseeable woes. But on the whole, in investing, spinoffs are the closest thing you can find to a sure thing.
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Why we like spinoffs so much
We think that spinoffs are the closest thing you can find to a sure thing for two main reasons:
1) The management of a parent company will only hand out shares in a subsidiary to its own investors if it’s all but certain that business, and the parent, will be better off after the spinoff.
2) Spinoffs involve a lot of work and legal fees. The parent will only spin off the unwanted subsidiary if it can’t sell the stock for what it feels it’s worth.
On February 6, 2026, the company completed its IPO of 7.63 million shares at $18.00 a share. Insiders also sold 3.37 million shares. The stock is now up 39% from the IPO price.
In February 2026, Edgewell sold its Feminine Care business, including the Playtex, Stayfree, Carefree, and o.b. brands, for $340.0 million. It plans to apply the proceeds to its long-term debt of $1.52 billion (as of December 31, 2025). That’s a high 1.48 times its market cap. It also held $223.3 million in cash and equivalents.
It completed the first stage on October 30, 2025 when it spun off its specialty chemical business as Solstice Advanced Materials. Honeywell investors received one share of Solstice common stock for every four shares they held.
The remaining firm will split off its automation and aerospace operations later this year.
Solstice shares are now up 70%, and we expect Honeywell’s new businesses will also reward investors with solid gains over the next few years.
It now plans to split into two independent, publicly traded companies. The first, called International Paper, will hold its North American operations. The second, called DS Smith, will own the EMEA (Europe, Middle East and Africa) assets. Investors should note that International Paper will retain a meaningful stake in the spinoff after it hands most of it to its shareholders.
Activist firms D.E. Shaw and Third Point now want the company to consider strategic alternatives for Homes.com, which it acquired in 2021 and is facing strong competition from more-popular real estate websites like Zillow. CoStar’s management has rejected these demands and will continue to invest in Homes.com. However, this business is losing money, and will not break even before 2030.
Eaton also strengthened its position through the recent acquisition of a company that specializes in liquid-cooling technologies. The deal expands its ability to serve clients.
Eaton now plans to spin off its Vehicle and eMobility businesses, known collectively as the Mobility Group. This division produces electrical power components for automotive and heavy equipment manufacturers.
The split will let Eaton better focus on its faster-growing electrical and aerospace segments.
Moreover, the new Mobility company will gain greater agility to respond to automotive technological changes.
The stock recently dropped over 50% after the company disclosed that the Securities and Exchange Commission (SEC) is investigating accounting problems that are preventing Kyndryl from filing its latest quarterly results. The situation also prompted both the Chief Financial Officer and the General Counsel to resign.