Rumors are flying that Goldman Sachs is considering spinning off its trading unit into a separate, brand new publicly traded company. Stockholders would receive shares in the new business, which would be mailed to them or deposited in their brokerage account, based upon the total shares of Goldman Sachs they owned. This move comes as a result of the financial reform legislation that limits the risks banks can take with their own money.
New Investors May Wonder - What Does This Mean? What Is a Spin Off?
For new investors, you may wonder what a tax-free spin off is, why it matters, and how it will affect you and your portfolio. To help you answer those questions, I wrote a special article called Tax Free Spin Offs - Profiting from Corporate Divestitures. It explains why companies sometimes choose to spin off a unit or business, the potential spin off method management will use (so-called pro-rate distributions vs. exchange offers), and much more.
It was designed to help remove any uncertainty about why you suddenly find yourself with a stack of stock certificates in a company you've never heard of and about which you know very little. Take a few minutes to read it so you'll never have to wonder what a tax free spin off is again ...