What are corporate actions?
A listed company may from time to time make changes to their issued shares, this type of event is called a corporate action. They are usually agreed upon by the company’s board of directors and authorised by the shareholders of the company.
Here are some common types of corporate actions:
Where a company distributes cash reserves to shareholders (out of current year’s profits or retained income). It is not necessarily compulsory for companies to issue dividends, however some companies have a reputation for paying dividends fairly regularly, making them an attractive option for potential investors.
This occurs when a company creates more shares in the market by dividing the existing amount of its shares in the market (aka ‘outstanding shares’). This creates more liquidity for the stock in general. The inverse of this is the consolidation (aka reverse stock split), where a company consolidates its outstanding shares.
Dividend Reinvestment Scheme (or Plan)
A cost-effective way of reinvesting your dividends into the same company that paid them out to the investor/shareholder. The company’s registrar collects the cash dividends that shareholders who elected for the reinvestment scheme/plan were to receive, and purchases more shares before allocating them to investors.
An invitation to current shareholders in a company to buy additional shares in that company, usually at a discount. This allows the company issuing these rights to raise additional capital.
This happens when the registered name of a company is changed. The name change may mean that the company may keep its history, or start anew. In the latter case, the stock exchange will treat the action as a de-listing and then a new listing.
When a listed company on the stock exchange has one or more subsidiaries (listed or unlisted) and gives its shareholders cash/shares in that subsidiary. Sometimes shareholders have a choice to elect whether they would prefer cash payment into their accounts, or to receive shares in the subsidiary.