Spinoffs

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.

See how you can make the most of these special investment opportunities by reading our special free report Spinoff Stock Investigator: All You Need to Know about Reaping the Rewards of Spinoffs.

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Spinoffs Library Archives
You Can See Our Spinoff Stock Portfolio For September 2026 Here.

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.
LUMINA METALS CORP. $9.88 is a hold. The company (Toronto symbol LMCU; Resources sector; Shares outstanding: 109.0 million; Market cap: $1.1 billion; No dividends paid; Takeover Target Rating: Medium; www.luminametals.pl) is developing three copper and silver projects in southwestern Poland.

On April 30, 2026, Lumina completed an initial public offering of 25.0 million common shares at $12.50 a share.
WARNER BROS. DISCOVERY INC. $29 remains a hold. The media giant (Nasdaq symbol WBD; Consumer sector; Shares outstanding: 2.5 billion; Market cap: $72.5 billion; No dividend paid; Takeover Target Rating: Highest; www.wbd.com) recently accepted a $31.00-a-share takeover offer from Paramount Skydance Corp. (Nasdaq symbol PSKY), which owns the CBS television network and Paramount studios. That topped an earlier deal to sell the studios and streaming operations to Netflix Inc. (Nasdaq symbol NFLX) for $27.75 a share.
On April 3, 2020, RTX Corp. (formerly called Raytheon Technologies) spun off its Otis (elevators) and Carrier (heating and air conditioning equipment) businesses. For each UTX share they held, investors received 1 share in Carrier and 0.5 of a share in Otis.

Carrier has jumped 380% as a separate firm as it taps into strong demand for cooling equipment by the builders of new artificial intelligence datacentres. However, Otis is up just 60% due to slowing elevator demand from China (about 15% of its total revenue).
ENERFLEX LTD. $28 is a hold. The company (Toronto symbol EFX; Manufacturing sector; Shares outstanding: 122.1 million; Market cap: $3.4 billion; Dividend yield: 0.6%; Takeover Target Rating: Medium; www.enerflex.com) took its current form in June 2011 when Toromont Industries Ltd. (Toronto symbol TIH) spun it off as a separate company. With the spinoff, shareholders received one share of Enerflex for each Toromont share they held. Enerflex serves natural gas producers by leasing and selling them equipment. That includes compression and processing systems, refrigeration gear, and power generators.
Spinoffs help companies unlock the value of their hidden assets, sometimes through takeovers. While a PayPal takeover seems likely, a buyout deal for MSG Sports would require the approval of the controlling family.

PAYPAL HOLDINGS INC. $61 is a hold. The company (Nasdaq symbol PYPL; Finance sector; Shares outstanding: 862.0 million; Market cap: $52.6 billion; Dividend yield: 0.9%; Takeover Target Rating: Medium; www.paypal.com) processes online transactions on millions of websites, including purchases made on the sites of its former parent company, eBay. PayPal also owns Venmo, a popular smartphone app for peer-to-peer money transfers.
SHERRITT INTERNATIONAL CORP. $0.475 is a hold. The company (Toronto symbol S; Shares outstanding: 704.0 million; Market cap: $334.4 million; No dividends paid; Takeover Target Rating: Highest; www.sherritt.com) owns 50% of a joint venture that produces nickel and cobalt at an open-pit mine in Moa, Cuba.

U.S. sanctions on Cuba, and fuel shortages in that country, have forced Sherritt to pause operations at the Moa mine along with its processing facility in Fort Saskatchewan, Alberta.

These two firms have attracted activists seeking to unlock the strong value of their brands. However, the high p/e for each stock limits its appeal for any new buying.

SHAKE SHACK INC. $73 is a hold. The company (New York symbol SHAK; Consumer sector; Shares outstanding: 42.8 million; Market cap: $3.1 billion; No dividend paid; Takeover Target Rating: Medium; www.shakeshack.com) operates 703 fast-casual restaurants, with about a third outside of the U.S. Those outlets sell mainly hamburgers, hot dogs and french fries. Franchisees operate 42% of those locations.
Foodmaker Conagra spun off its potato-processing operations as Lamb Weston in November 2016. Investors received one share of Lamb Weston for every three Conagra shares they held.

While Lamb Weston is down sharply from its 2023 peak of $115, it’s still up over 60% since the split. However, Conagra has dropped 55% as consumers shift away from processed foods.
H&R REAL ESTATE INVESTMENT TRUST $10 is a hold. The REIT (Toronto symbol HR.UN; Units o/s: 262.6 million; Market cap: $2.6 billion; Dividend yield: 6.0%; Takeover Target Rating: Highest; www.hr-reit.com) spun off most of its retail properties to Primaris Real Estate Investment Trust (Toronto symbol PMZ.UN) in January 2022. At the time, unitholders received one unit of Primaris for every four H&R units they held. Today, H&R owns 105 residential, industrial, office and retail properties in Canada and the U.S.