As part of its restructuring plan, a holding company plans to undertake an IPO for 35 percent of the shares it owns in a subsidiary. The sale of these shares would be called a
A. Divestiture
B. Split-off
C. Split-up
D. Equity carveout
E. Breakup
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A diversified automotive parts supplier has decided to sell its valve manufacturing business. This sale is referred to as a
A. Merger
B. Divestiture
C. Spin-off
D. Equity carveout
E. Liquidation
Which of the following is not true of a split-off?
A split-off is a variation of a spin-off
B. Parent company shareholders receive shares in a subsidiary in return for surrendering their parent company shares
C. Split-offs are best suited for disposing of a less than 100 percent investment stake in a subsidiary,
D. A split-off reduces the parent firm's earnings per share.
E. The split-off reduces the pressure on the spun-off firm’s share price
Which of the following is a common problem associated with tracking stocks?
A. Tracking stocks often de-motivate managers of the business for which the stock is created
B. Such stocks are too complicated for investors to understand
C. Tracking stocks may create internal operating conflicts among the parent's business units
D. Such stocks often create huge tax liabilities for the parent
E. None of the above
An equity carve-out by a parent of one of its subsidiaries is often a precursor to a
A. Complete divestiture or spin-off of the subsidiary
B. An acquisition
C. A merger
D. Joint venture
E. The creation of a tracking stock
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