A Spin-off is the process of splitting a company, as a result of which shareholders receive additional stocks of a newly formed subsidiary. In most cases, the value of the parent company's stocks decreases by an amount equal to the value of the newly received stocks, thereby preserving the overall portfolio value.*
*For convenience and faster settlement, instead of new shares (which may not yet be available on the platform), clients receive the cash equivalent of the value of the new shares.
Example
As a result of AT&T’s corporate split, a subsidiary company — WBD — is created, and previous AT&T shareholders receive WBD shares (approximately 0.25 WBD shares for each 1 AT&T share).
Thus, a holder of 100 AT&T shares would additionally receive 25 WBD shares and become a shareholder of both companies.