A spin-off is the process of creating an independent company through the sale or distribution of new shares of an existing business or division of a parent company. This is typically done when the spin-off companies are expected to be worth more as independent entities rather than as parts of a larger entity.
Example:
Company A has performed a spin-off and will be issuing 1 share of company B for every 5 shares of Company A shares held in your account. If you are holding 100 shares of Company A, you will receive 20 shares of Company B as per the spin-off terms.
Please note that you do not need to take any action for this mandatory corporate event. We will assist you in booking these positions accordingly.
How does spin-off affect my CFD account?
If you have an open position on a stock that announces a spin-off, we’ll create a position on the new company at a level of zero in accordance with the terms of the spin-off on the ex-date.
If you have a guaranteed stop on your position, we’ll amend it in accordance with the terms of the offer. A separate position will then be posted on your account in the name of the spun-off company, with a stop attached to ensure your total monetary risk remains the same.
Please be aware that spin-off shares may or may not be tradeable on the market. Once the shares are tradeable, you may choose to trade the new company.
What if I have a short position?
If you have a short position, the spin-off shares would be opened as a new short position at a level of zero, increasing the number of shares you hold short in accordance with the spin-off terms.
Please note: This information is intended as a generic example, and subject to change at any point. It may not apply in every scenario.