Series 79 practice questioneasyDivestitures and Spin-offs
In a spin-off, what do the parent company’s shareholders generally receive?
- AShares of the separated subsidiary distributed pro rata✓ Correct answer
- BCash from the underwriters only
- CConvertible notes of the parent
- DAppraisal rights in the parent automatically
Explanation
Why A — Shares of the separated subsidiary distributed pro rata
Shares of the separated subsidiary distributed pro rata A spin-off distributes the subsidiary to the parent’s existing shareholders, creating two independent public companies. It is often used to unlock value or sharpen strategic focus.
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