Carveouts also benefit investors

Article Excerpt

Stock carveouts can be thought of as split-off IPOs or partial spinoffs. They’re a type of reorganization where a firm sets up one of its businesses as a separate company and uses an initial public offering to sell partial or minority interest in the new firm. The parent typically retains an 80% stake. Listing shares in the new company lets the parent assess the true market value of the independent new business. It also gives the carveout a track record as a public company with its own financial statements. A carveout has many of the benefit of an outright spinoff: as a standalone stock, it gains greater access to capital, plus its own CEO and board. A carveout is often, but not always, followed by a spinoff, where the parent company hands out its remaining interest to its shareholders. shareholders…

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