Your financial advisor suggests adding spin-off stocks to your portfolio. She cites potential gains and favorable tax treatment as obtainable benefits. “What is a stock spin-off and what is an example of a spin-off of a stock”, you asked. Read on to find out your advisor’s answer.
What is an Example of a Spin-Off of a Stock?
An example of a spin-off of a stock is Phillips 66. This event-driven corporate action is an excellent stock spin-off example because it highlights the transaction’s benefits and structure. Here are the details of a quality company that is well suited to answer: What is an example of a stock spin-off?
Background and Rationale – ConocoPhillips, the parent company, is a $142 billion global energy behemoth. It is an integrated firm specializing in oil exploration, production, downstream marketing, refining, and midstream operations.
The company divested the downstream and midstream operations from the parent firm to form an independently operated spin-off, Phillips 66. The rationale was that the firms could pursue their visions, missions, and respective strengths more effectively.
Transaction Particulars – ConocoPhillips completed the Phillips 66 spin-off in 2012 and distributed the spin-off shares to existing parent shareholders pro-rata. Each ConocoPhillips shareholder received spin-off shares in proportion to their current parent company share holdings.
Phillips 66 has its own board of directors, management, assets, liabilities, credit facilities, and employees separate from ConocoPhillips. The spinoff trades on the New York Stock Exchange (NYSE) under the ticker symbol (PSX).
What is an example of a spin-off of a stock? Phillips 66’s share distribution and independent governance structure are hallmarks of a spin-off stock.
Spin Off Core Business - Phillips 66’s core focus is the operation of several domestic and international refineries transforming crude oil into petroleum products and marketing their goods and services to a global client base.
What is an example of a spin-off? Phillips 66 is a spin-off whose secondary function is the storage, and midstream transportation of refined crude oil and liquid natural gas (LNG).
Divestiture Impact - Spinning off the downstream and midstream operations allows the parent firm and the spin-off company to streamline operations, capture targeted growth opportunities, and tailor sector marketing efforts.
Investors now have the option to invest in ConocoPhillips’ upstream business and/or the mid and downstream business growth potential of Phillips 66. The spin-off restructuring unlocks mutual shareholder value and drives heightened overall value for both firms.
What is an example of a spin-off of a stock? Phillips 66 is a prime example of spin-off shares, but it’s not the only one. The following firms directly address the question, what is an example of spin-off shares?
PayPal Holdings, Inc (PYPL) – eBay spun off PayPal in 2015 allowing PayPal, a digital payment platform, to expand its offering to merchant services, B2B payments, and digital wallets.
Altria Group, Inc. (MO) – Phillip Morris Companies spun off Altria in 2008. The spin-off markets tobacco, e-cigarettes, and vapor products. Altria’s divesting precipitated the firm’s move into alcohol and the cannabis industry.
What is an example of a spin-off of a stock? Phillips 66 is an example of a spin-off created to allow the parent company and spin-off to concentrate on their core businesses, streamline operations, and attract new and mutual investors drawn to untapped shareholder value.
Read next: What is the Difference between a Spin off and IPO?
