Corporate actions

What is a corporate action?

On occasion, some companies that you have invested in will propose an event that could affect your investment. The event is also known as corporate action.

In some cases you’ll be able to choose to participate and in other times it’ll be mandatory.

How do I respond to a corporate action?

To respond to the corporate action, you’ll need to sign in to your account and select ‘Corporate actions’ and then ‘Notifications’.

If you have any questions regarding corporate actions please read our FAQs as we’ve included the answers to the questions you ask us most.

How to give your instructions

How to get company information

What happens after you give your instruction

Main types of corporate actions

1. Rights Issues

  • When a rights issue takes place, shareholders have the option to purchase additional shares at a discounted price.

    If a shareholder chooses to action these rights then new shares will be allocated to them on receipt of payment and completion of the event. These shares will then become ordinary shares and will be tradeable at the current market price.

  • By choosing not to action these rights a shareholder will not lose any shares, rights are offered by a company at a discounted price in addition to a shareholders existing shares.

    Please note: While you won’t lose any existing shares your share holding will become more diluted as there will be more shares on a stock market.

  • When a company announces a rights issue, holders of the stock will be issued ‘nil paid rights’ which each represent a ‘right’ to buy a new share.

    As these ‘nil paid rights’ are tradable on the stock market, they are apportioned a value using the book cost of your total share holding.

    When choosing to action your ‘rights’ and purchase additional shares, new shares will be given a book cost which will include the discounted offer price you paid and the stock market value of the nil paid rights.

2. Stock splits

  • A company may decide to split its stock into new shares to increase its liquidity on the market, this usually happens when the share price is very high and makes it harder for smaller investors to buy into the company. Companies will usually use a 2-for-1 or 3-for-1 ratio which means for every share you had before you would receive 2 or 3 shares.

  • If a company wants to attract new shareholders but feels that its share price is too high they can arrange a stock split to lower the stock’s price, making shares more affordable.

3. Mergers

4. Spin-off

Corporate action takeaways

  • A corporate action is an event carried out by a company that impacts its stakeholders.
  • Common corporate actions include the payment of dividends, stock splits, tender offers, and mergers and acquisitions.
  • Corporate actions are normally approved by a company's shareholders and board of directors.