Sarissa Resources Inc (SRSR)

[jimHorse]

This is the post that finally allowed me to understand what will be happening. As I understand it, Evolving Gold spun out a new gold company called Prosperity. Evolving Gold shareholders were issued a "dividend-in-kind" of 1 share of the new Prosperity company for every 10 shares of Evolving Gold held on Feb 16, 2011. After the spin out, Evolving Gold held 48.5% of the new Prosperity shares.

I looked up the historical prices to get an idea of how the process affected the share prices:
-The spinout announcement was made on Feb. 2, 2011. The day prior to the announcement, the parent company Evolving Gold (TSX-EVG) closed at 0.97.
-On Feb 15, a day before the ex-dividend date, it closed at 0.98.
-On March 3, the spin out was completed and Prosperity (TSXV-PPV) was issued to shareholders at 0.15. Prosperity began its first day of trading opening at 0.17 and closing at 0.25. On that same day, Evolving Gold closed at 0.91.
-As of yesterday, the spun out company closed at 0.60 and the parent company closed at 0.78. So...

If you had owned $1 million worth of Evolving Gold shares on the date they announced the spin out a little more than 2 months ago, you would currently own $804,000 worth of the parent company and $400,000 worth of the spun out company, for a net gain of slightly more than 20%.

Obviously those are both TSX companies, and they have other circumstances that are specific to those companies, but I just wanted to get an idea of how a "spin out" such as this COULD work. Thanks to ILVELV for the original link.