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What's in it for the shareholder when a Company floats a new venture?

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I am curious to know as a shareholder of a company what happens when a company decides to float one of its subsidaries. Do the existing shareholders automatically recieve free shares in the new float, or are they available at a discounted price or just given the option to purchase prior to the public invite. Are there rules to govern this?

There seems to me to be an unfairness (potentially) to existing shareholders as the former parent company would lose value and its share price decreases, then the shareholder is made to pay for something they previously owned. At the same time the board (probably the same personnel) gain access to additional board fees, and share issues etc.

Anyone point me in the direction to learn a little more or share past experiences on what happens. Are these seen as good opportunities which I imagine depends on the bullish or bearish mood of the market.

Thanks in advance
 
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Re: Whats in it for the shareholder when Company splits and floats a new venture.

... share past experiences on what happens. Are these seen as good opportunities ...

This may help?!
In cases as you describe, I have oft heard the term "in specie distribution"

http://www.investopedia.com/terms/i/in_specie.asp

When Argonaut was spun out of Pima I received some smallish number of ARE and AREO. After brokerage costs I made $35/$65 respectively. Better than a poke in the eye with a sharp stick!
 
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Thanks Burglar.
So more likely give 1 share for x number of shares held in original company.
That sounds reasonable (and logical).
I trust most of these are positive experiences. :rolleyes:
 
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Thanks Burglar.
So more likely give 1 share for x number of shares held in original company.
That sounds reasonable (and logical).
I trust most of these are positive experiences. :rolleyes:

The parent company often claims that the spinoff allows them to focus on their latest company maker or their core business!
I take it with a grain of salt, and watch what effect it has on the SP

In truth, some do really well (I remember MEE-Metex spun off a good one)
OXR-Oxiana spinoff TOE-Toro also comes to mind.
Some have mixed results.
CRS-Croesus went as near bust as is possible while the spinoff AZS-Azure seems to be doin' very nicely.
 
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Thanks again Burglar, I think Westpac spun off part of their business too a few years back, I dont recall exactly what it was, or how they are doing. While I was a shareholder around that time I didnt recieve anything other than the announcement (I think I was maybe just out of Westpac). The name I think..BTInvestments?
Not sure whatever happened there.

Would be good to review a list of spin-offs and compare the before and after of the original company and the progress of the new one. Thanks for those you mentioned.
 

skc

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Every case is different. Floating a new venture is really no different to a normal asset sale with the exception that the asset is then floated on the market.

In some cases you may get the share in the new company, in other cases the mother company may decide to hold on to the cash or some shares in the new company. In theory you are no worse off either way, all else being equal.

ORI spun DLX out and it did quite well. ORI shareholders got DLX distributed to them.
WDC spun WRT out and nothing really changed. WDC retained ~50% of WRT.
PPX came out of AMC and PPX then got hammered.
BSL was a BHP spin off and has been up and down since.


Thanks again Burglar, I think Westpac spun off part of their business too a few years back, I dont recall exactly what it was, or how they are doing. While I was a shareholder around that time I didnt recieve anything other than the announcement (I think I was maybe just out of Westpac). The name I think..BTInvestments?
Not sure whatever happened there.

Would be good to review a list of spin-offs and compare the before and after of the original company and the progress of the new one. Thanks for those you mentioned.

BTT was the spin off.
 
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