In a spin-off:
A)shares of the new company are given to shareholders of the parent company.
B)shares of the new company are sold as a public offering.
C)shares of the new company are bought by borrowing or issuing junk bonds.
D)a private equity firm sells the assets of a portion of an acquired company.

Question

Quizplus · Accepted Answer

In a spin-off, shares of the new company are typically given to the shareholders of the parent company as a way of distributing the new company's ownership to the existing shareholders. This allows the shareholders to benefit from the potential success of the new company, while also allowing the parent company to focus on its core business. Option B is incorrect because a public offering is not always necessary, and some spin-offs may choose to distribute shares to existing shareholders instead. Option C is incorrect because borrowing or issuing junk bonds is not typically how a spin-off company raises funds. Option D is incorrect because a private equity firm selling assets is not the same as a spin-off.

In a Spin-Off