The reform of the IPO registration system and carve-out rules provides new opportunities for the list companies. The paper conducts a case study on the equity carve-out of Shanghai Electric Group (SEG) to show how the enterprise seizes the opportunity to improve its overall performance. As a diversified businesses, SEG cannot ensure its subsidiary, Electric Wind Power, EWP, has the necessary funding for researching and producing wind turbine generator systems, especially as the development of the industry is accelerated by the “double-carbon” objective of the government and the industry is becoming increasingly competitive. The new IPO registration system and carve-outs policies enable SEG to conduct an equity carve-out, allowing EWP to become an independent company and go public on the Sci-Tech Innovation Board. Our study shows that the carve-out eliminates the diversification discount and realizes a high valuation for EWP, therefore alleviating the financial constraints. As the carve-out promotes the management incentives for the subsidiary and enhances decision-making efficiency, both the operating state and R&D output improve significantly, as does the competitive strength of EWP, ultimately leading to better business performance and increased shareholder wealth. The carve-out allows the subsidiary to operate independently and makes it unaffected by the risk events of SEG afterwards, although the stock price suffered short-term pressures. In summary, our case study proves that the new IPO registration system and carve-out rules remove institutional constraints, so that diversified companies can activate the development of their subsidiaries by carve-outs, thereby promoting the capital allocation efficiency of financial market.