In a split-off, the investor must decide between the new company and the parent. Holders of the parent company stock must choose to continue owning stock in the parent or, instead, exchange some or all of the parent stock for stock in the Spin Off. The parent offers its existing shareholders stock in the subsidiary in exchange for shares in the parent company. If the parent distributes 80% of the subsidiary stock, the split is tax-free. What's more, in an effort to induce enough shareholders to swap stock, investors are offered shares in the subsidiary that are worth more than the shares being returned to the parent company. This offered "premium" explains why split-offs are often oversubscribed.

Parent/Subsidiary Date Siza($mm) %of Parent Shares Repurchased Initial Premium Closing Premium Over Subccription Factor Sub as % of parent Market
AT&T / AWE 5/21/01 $7.8B 10% 7% 1% .87X 22%
Sara Lee / Coach 4/4/01 $998M 5% 12.90% 6.90% 2.1X 6%
General Motors / Hughes Electronics 5/19/00 $8.27B 14% 17.70% 10.10% 3.9X 70%
DuPont / Conoco 8/6/99 $11.7B 13% 17.90% 3.30% 2.4X 20%
Lockheed Martin / Martin Marietta 10/18/96 $906M 4% 17.50% 5.20% 5.4X 6%
Eli Lilly / Guidant 9/18/95 $1.55B 6% 13.10% 8.80% 2.9X 9%