A-Z Popular Blog Encyclopedia Search »
Investing
 Advertisements
Related Guides
Investment Analysis
Key Concepts
Investment Analysis
Investing Risk

Investing Strategy

15 Examples of a Corporate Action

 , June 08, 2018
A corporate action is a change initiated by a public company that directly impacts the securities issued by the firm such as equity and debt. Generally, such actions are approved by the firm's board of directors and may also require the approval of shareholders. In some cases, a corporate action is triggered by regulations, contracts, market rules or third parties. The following are illustrative examples of a corporate action.

Dividends

Distributions of funds, stock or other assets to shareholders.

Stock Splits

Increasing the number of shares outstanding by issuing more shares to current shareholders. Typically done to increase the liquidity of a stock or to make a stock with a high price more accessible to small investors.

Reverse Stock Split

Decreasing the number of shares outstanding by exchanging the current shares of a company for less shares. This results in an increase in share price. A reverse stock split is often done to meet price minimums for stock exchanges or institutional investors.

Mergers & Acquisitions

The consolidation of companies though various types of financial transactions. This can result in cash or new shares being distributed to current shareholders in exchange for existing shares.

Tender Offer

A type of takeover bid where a bidder makes a public, open offer to acquire stock at a specific price for a period of time. This may or may not be endorsed by the board of directors of a firm. The offer price is usually higher than the market price at the time of the offer.

Spinoffs

Creating a new company from an organizational unit of a firm such as a division. This is often done by issuing shares of the new company to current shareholders.

Rights Issue

An offering of shares to existing shareholders often at a discount to the market price. The number of shares offered is typically in proportion to the number of shares held by each shareholder. This is a way for a firm to raise capital. Shareholders are not obligated to purchase the shares offered.

Bonus Issue

The issue of new shares to current shareholders for free. This is similar to a stock split as it increases the number of shares without any financial impact to the firm.

Coupon Payment

Interest payments to bond holders.

Early Redemption

The redemption of bonds before the date of maturity.

Buybacks

A firm that buys its own shares back to reduce the number of shares outstanding.

Name Changes

Changing the name of a firm and/or its ticker symbol on an exchange.

Bankruptcy

A firm that is in financial distress that seeks protection from its creditors.

Liquidation

The process by which a company is brought to an end with assets distributed to debt holders and potentially shareholders.

Delisting

The removal of a security from a stock exchange. This can be done to take a firm private or to complete a merger or acquisition. A firm may also be delisted due to failure to meet the requirements of an exchange, bankruptcy or because the firm is ceasing operations.

Mandatory vs Voluntary

A mandatory corporate action affects all shareholders such that individual shareholders have no choice to make. A voluntary corporate action is a choice to shareholders such as a tender whereby shareholders may chose to sell their shares at the offering price. A third situation is a mandatory corporate action with choice, such as a dividend that can be paid in cash or in shares.
Overview: Corporate Actions
Type
Definition
An event that directly impacts the shares or debt of a public company.
Related Concepts

Investment Analysis

This is the complete list of articles we have written about investment analysis.
Channel Check
Corporate Actions
Cost Of Capital
Enterprise Value
Financial Analysis
Inherent Risk
Liquidity Risk
Net Present Value
Organic Growth
Smart Money
If you enjoyed this page, please consider bookmarking Simplicable.
 

Investment

A few articles about investing.

Calculated Risk Examples

The definition of calculated risk with examples.

Speculative Bubbles

The common types of speculative bubble.

Value Investing

A complete overview of value investing.

Market Cap

The common levels of market cap.

Wealth

The common types of wealth.

Insider Information

The definition of insider information with examples.

Short Selling

The definition of short selling with examples.

Long Squeeze

The common types of long squeeze.

Enterprise Value

A complete overview of enterprise value with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map