The term 'spinoff' refers to what type of corporate action?

The term 'spinoff' specifically refers to the creation of a new independent company from an existing company. This corporate action typically involves a parent company distributing shares of a newly formed subsidiary to its existing shareholders, effectively making the subsidiary a standalone entity. Spinoffs are often undertaken to enhance shareholder value by allowing the newly independent company to focus on its core business, thereby potentially achieving better performance than when it was part of the larger parent company.

This process can also allow the parent company to streamline its operations and concentrate on its primary business activities, while the spinoff can operate with greater agility and focus. Consequently, the correct understanding of a spinoff encompasses the transition of a division or part of the company into its own legally independent organization through the method of share distribution to shareholders.