# Can someone explain how a spinoff works?



## indexxx (Oct 31, 2011)

Logged in to my Questrade account just now, and saw I had six securities in my RRSP that i had never heard of and never purchased- 10,000 shares of each. When I contacted Questrade to ask about it, they said it looked like it was a spinoff from a company I held shares in but sold off last week. So my question has two parts- (it was a pot stock that I held for a while and sold last week after a large one-day gain): why would a small company spin off six different companies and give me equal amounts of shares that I held of the parent; and why, if I'd sold it a week ago, would I still be eligible for those shares today?

Thank you.


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## Sm5 (Nov 2, 2014)

Just guessing but probably being used as a method of these new entities to 'go public'. These new entities are spun out and then reverse take-overs likely occur to allow other entities to become public entities without the expense of preparing/filing a prospectus.

You received shares because you held the underlying stock on a record day (same as a cash dividend, they gave you a 'stock dividend' of these new shares).

Just a guess though, may not be what occurred in this instance.


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## indexxx (Oct 31, 2011)

Sm5 said:


> Just guessing but probably being used as a method of these new entities to 'go public'. These new entities are spun out and then reverse take-overs likely occur to allow other entities to become public entities without the expense of preparing/filing a prospectus.
> 
> You received shares because you held the underlying stock on a record day (same as a cash dividend, they gave you a 'stock dividend' of these new shares).
> 
> Just a guess though, may not be what occurred in this instance.


Thanks for the insight.


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