Corporate actions

Check out what Corporate actions are and how can they impact a stock’s price.

Updated over a week ago

*Stock trading: countries: UK, France, Poland, Belgium, Portugal, Netherlands, Germany, Italy, Luxembourg

As a stock investor (who uses our app) you might get impacted by different kinds of Corporate Actions. Those usually bring material changes to a company and might impact the stock's price.

The basic details of corporate actions are described below, as well as what, as a Shares user, you can do and expect in their case.

The following are the most common corporate actions:

1. Dividends

A dividend is a distribution of corporate profits to eligible shareholders, made out of the earnings during a period (year, half-year, or quarter).

a) Who decides on the amount of the dividend per share?,

Every company decides its own dividend payout and it does not depend on the exchange. Please be aware that not all companies pay dividends.

b) How will I receive my dividend?
You need to make sure of the following steps to receive a dividend:

  • Make sure you bought the stock before the ex-dividend date and you hold it during the date. If you bought a stock on its ex-dividend date or after, you will not receive the next dividend payment

  • The payment date is when the dividend will be distributed between shareholders.

  • Your dividend payouts will be directly credited to your Shares cash account shortly after their distribution.

2. Mergers

The Merger is a corporate action when two companies combine together and operate as a new single legal entity under the banner of one corporate name.

a) What will happen to my stocks during a merger?

When a merger takes place, shareholders are substituted with the stocks of the new company or are provided a cash compensation.

b) Will I get shares of the new company?

Depending on the merger agreement we will either provide you with the new stocks or cash compensation.

3. Splits

A stock split is when a company decides to split the number of outstanding shares. This corporate action will result in increasing the outstanding shares but will not change the overall valuation of the company.

a) How will it impact the shareholder?

If a company decides to do a 2 for 1 stock split, the number of shares you own doubles on the stock split date. If you had 100 shares(worth $50 per share, $5000 in total) of a company that has decided to split its stock into 2, you’d end up with 200 shares after the split - each of the shares is now worth $25, with a total of $5000.

b) What happens to my stocks during a stock split?

  • You will be entitled to receive new shares respective to the number of shares you own.

  • The newly created shares will be added to your portfolio after the stock split is complete.

4. Reverse splits

A reverse stock split is when a company decides to merge the number of outstanding shares. This corporate action will result in decreasing the outstanding shares but will not change the overall valuation of the company.

a) How will it impact the shareholder?

If a company decides to do a 2 for 1 reverse stock split, the number of shares you own reduces by half instantly. If you had 100 shares(worth $50 per share, $5000 in total) of a company that has decided to reverse split 2 of its stocks into 1, you’d end up with 50 shares after the split - each new share is now worth $100, for a total value of $5000.

b) What will happen to my stocks during a reverse stock split?

Your portfolio will be adjusted according to the newly diluted number of shares.

5. Acquisitions

An acquisition is when one company takes over another company. The company that performs that acquisition is called the acquirer and the company that is being taken over is called the target company. In the case of an acquisition, the target company ceases to exist.

a) What happens to the shares during an acquisition?

When an acquisition takes place, the shareholders of the acquiring company (X company) do not receive any new shares, but the shareholders of the target company (Y company) receive cash or shares of the X company, depending on the details of the acquisition agreement.

b) Will I get shares of the new company?

Depending on the details of the acquisition agreement we will either provide you with the new stocks or cash.

6. Buy-backs

When a company buys its own shares from the open market, it is called a buy-back. Buy-backs reduce the number of outstanding shares in the open market.

a) How will it impact the shareholder?

The shareholders have no direct impact on their shares due to buy-backs, but the number of shares in the open market is reduced.

7. Spin-offs

Spin-offs are when an existing public company decides to sell a part of its assets or an existing division to create a new company in place of the particular division.

a) How will it impact the shareholder?

In most cases during a spin-off, the investors of the parent company are distributed with shares of the new company.

b) Will I get shares of the new company?

Yes, if you had parent company's shares on the spin-off day, you will also receive new company's shares (unless the agreement of the company that made the spin-off provides otherwise)

8. Delistings (including bankruptcies)

When the stocks of a publicly-traded company are removed from an exchange, it is called a delisting. A company may be removed from the stock exchange due to stock exchange decisions or due to bankruptcy(when a company is unable to pay its debts, it files for bankruptcy).

a) Can I sell my stocks if the company gets delisted?

If a company gets delisted from an exchange, sometimes it is still possible to trade the company stocks using the OTC market. In such cases Shares will try to find the best solution possible for the customers holding the stocks of a delisted company. Please remember that it is possible that in the case of delisting of the company on the basis of a company agreement, shareholders may lose their shares and may not be entitled to cash reimbursement.

9. Trading halts

A trading halt implies a temporary pause in trading. Depending upon the reason, it may just be one particular stock or many stocks. The most common type of halts are individual stock halts for the period of 5 minutes, after which the trading is resumed.

a) Can I buy/sell shares in the app during trading halts?

The Shareholders will not be able to sell their shares or purchase new shares during a trading halt. Any trades of a stock experiencing a trading halt will not be executed.

10. Warrants

A warrant is a derivative of an underlying asset. In most cases, warrants are issued by the company itself. Warrants provide you with the right to buy or sell the derivative at a particular price within a certain period of time. A warrant, however, is not an obligation.

a) What will I be able to do with the warrants if I receive them?

If the company decides that the warrants received through a corporate event will be sent to its shareholders, we will deposit them into your portfolio.

Please note that a Third Party Broker may at its sole discretion and without notifying you liquidate the warrants you have received as a result of corporate action.

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