Corporate action types & events
CA types
Corporate actions are events initiated by a company that affect its securities (e.g., stocks or bonds). They are classified into mandatory, choosable, and voluntary corporate actions based on shareholder participation and decision-making.
The following sections give you a brief overview of these three CA types.
You can find a more detailed glossary of corporate actions here.
| CA type | Description |
|---|---|
| Mandatory | These actions are automatically applied to all shareholders, with no choice or involvement required. These measures are initiated by the company's Executive Board as part of its corporate governance. Examples Stock splits, dividends (cash or stock), mergers & acquisitions, spin-offs, etc. |
| Choosable | Shareholders have options but must take action to select their preferred choice. If no action is taken, a default option is applied. Examples Dividend election (cash vs. stock), stock buybacks with election, etc. |
| Voluntary | Shareholders actively decide whether to participate. If they take no action, they remain unaffected. Examples Tender offer, exchange offer, rights issue, etc. |
CA event types
Now you have got to know the three different CA types. Let's now look at the details of individual events.
This section covers the most common corporate action event types.
| Event type | Description |
|---|---|
| Stock split | A stock split occurs when a company increases the number of its outstanding shares by issuing additional shares to existing shareholders while reducing the share price proportionally. The total market capitalisation remains unchanged. Example A 2-for-1 stock split means a shareholder with 100 shares will now have 200 shares, but the share price is halved. |
| Reverse stock split | A reverse stock split is when a company reduces the number of outstanding shares by consolidating multiple shares into one while proportionally increasing the share price. This is often done to meet minimum stock exchange price requirements or improve stock perception. Example A 1-for-10 reverse stock split means a shareholder with 100 shares will now have 10 shares, but the price per share increases tenfold. |
| Rights issue | A rights issue (Subscription RHDI) is when a company offers existing shareholders the right to purchase additional shares at a discount before they are offered to the public. This is often used to raise capital. Shareholders can choose to participate or sell their rights. Example A 1-for-5 rights issue allows a shareholder with 500 shares to buy 100 more at a discounted price. NOTE Intermediate securities distribution (RHDI) will always issue an interim ISIN, which will be followed up by another corporate action and exchanged for securities or cash. |
| Dividend option | A dividend option (DVOP) refers to cases where shareholders can choose how they receive their dividends. Common options include: - Cash dividend: A payout in cash per share. - Stock dividend: Additional shares instead of cash. - Reinvestment plan: Automatically reinvesting dividends into more shares. |
| Annual General Meeting | An Annual General Meeting (AGM) is a legally required yearly gathering where a company's shareholders discuss financial performance, vote on key matters (e.g., board elections, dividends), and review future plans. Shareholders may attend in person or vote remotely. |
| Delisting | Delisting happens when a company's shares are removed from a stock exchange after financial collapse or failure to meet listing requirements. Investors typically lose most or all of their investment, and shares may trade over-the-counter (OTC) if the company undergoes restructuring. Example Delisting due to bankruptcy. In the event of a delisting and, in this case, bankruptcy, there are several options. - One-off sale If there are trading venues where this product is still traded, it may be possible to facilitate a one-off sale of your entire position. This would be done on a best endeavours basis, without acknowledging any legal obligation on our part. If this is a possibility, we will contact you with specific steps to facilitate the sale. - Trading re-listed instruments If the company emerges from bankruptcy, it may become tradable again. If this is the case and it is relisted with our trading partners, you will be able to buy and sell it again as usual. Until then, the instrument will remain in the portfolio as a non-tradable position. - Portfolio transfer Another option is to request a portfolio transfer of the position to a broker and affiliated custodian that can still facilitate the sale. In a portfolio transfer, this position is transferred from the client and Upvest to another broker and affiliated custodian. This can be arranged by contacting the client and requesting the transfer. NOTE After the date of delisting, the non-tradable position remains on the client's account indefinitely as it continues to belong to them. Only if they request a transfer of this position to another broker will it be removed. |
| Merger & acquisition | A merger occurs when two or more companies combine to form a single entity, often to achieve business synergies, expand markets, or increase efficiency. Shareholders of the merged company typically receive shares in the new entity. Example If Company A merges with Company B, shareholders might receive 1 new share of Company AB for every 2 shares of Company A or B they previously held. |
| Change | A change event is a corporate action that involves changes to the characteristics of a security. These changes are usually of an administrative or operational nature and do not have a direct impact on the value of the company. |