A corporate action is any activity that brings a material change to an organisation and, as a result, impacts its stakeholders. These actions may be voluntary, when investors choose to participate, or mandatory, where participation is obligatory. Examples of the most common corporate actions include:
- Dividend distributions
Companies can issue dividends in 2 forms: cash or stock. These are a share of the company's profits being paid to owners of the stock. When a company issues a cash dividend, each shareholder receives amount of money per share owned. On the other hand, stock dividends involving distributions additional shares to existing shareholders.
- Stock Splits
A Stock Split divides the value of each of a company's outstanding shares. In this scenario, an investor initially holding one share would automatically own two shares afterward, with each new share being worth half the value of the original share. It is crucial to remember that a stock split is a "non-event" in financial terms in that it does not change the company's overall equity nor its market capitalisation.
- Rights Issues
In a Rights Issue, a Company offers its current shareholders the possibility to acquire new or additional shares prior to making them available publicly.
- Spin-Offs
A Spin-Off occurs when a publicly listed company either sells off ("divests") part of its assets or issues new shares to form a separate company. Often the "divesting" refers to the process of selling certain assets, business areas or investments to streamline future operations of the Company or to refocus company strategy.
- Name or trading symbol name changes
From time to time, companies may change their name and/or ticker symbol. This could be the result of a merger or acquisition, or a simple re-brand. Any such change has no impact on your investment or the value thereof.