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Registered Spin-Offs

In a registred spin-off transaction a private company goes public by issuing shares of its common stock to an existing publicly-traded company. The common private shares are then formally registered with the SEC with a registration statement. Shares are issued in the form of a stock dividend on a pro-rata basis to shareholders of the private company from the public company. 

A registered spin-off entity will subsequently apply for its own ticker symbol with the end result being two publicly-traded companies, including their own common shareholders.

Spin-Off Advantages

  • A registered spin-off’s shares can be marketed in a secondary public offering at a later date without the need for an expensive Initial Public Offering (IPO).
  • In a registered spin-off only a small percentage of the private company shares are distributed as a dividend. Because the majority of the shares remain under the private company’s control, the new public company is retained by the private firm’s shareholders.
  • At the time of a registered spin-off the newly-formed public company is provided an existing base of shareholders. Having an immediate active shareholder base, eliminates one of the most time-consuming steps of preparing a private company to go public.
  • Shareholders in the private company are allowed, subject to volume limitation in Rule 144, to sell their securities in the public market. By being allowed to include their shares in the registration for public stock distribution, the private company shareholders are able to have a liquid exit, albeit with some limitations on volume, of their shares in the business.