Corporate Actions
What is a corporate action?
A corporate action can be defined as an event that brings about a material change to a stock or an event that is initiated by a firm that has an impact on its shareholders.
Dividends, stock splits, acquisitions, mergers and stock buy-backs are all examples of corporate actions.
Dividends
If you hold a position on the eve of the ex-dividend date in a company that has announced a dividend, there will be a cash adjustment made to your account on the day that the stock goes 'ex-dividend'.
Typical Example:
- Vodafone announces a 15p dividend.
- You currently hold 3,000 Vodafone CFD shares.
- 15p x 3,000 = 450.00.
- 450.00 will be credited to your CFD account.
- (If you hold a short position going into the ex-dividend date then your account will be debited for the same amount).
On your daily statement the dividend will appear under Ledger Activity as:
Corp Action: Cash Dispersion Corp Action:
Cash Disp XXX paying YYYY
(Where XXX is the instrument and YYY is the amount of the Corporate Action).
Stock splits
Stock Splits are used when the value of a company's stock is getting too high. The company will basically offer more stocks in the company but at a lower price.
Typical example:
- You hold 300 contracts in Y at a price of 1,607 per share.
- Company Y announce on X date, that it will be issuing a stock split of 5 for 1.
- Hence for every 1 stock you hold you will be issued 5.
- Now you will hold 1500 contracts at the reduced price of 321.4.
- Note the overall contract value remains the same (300 contracts x 1,607 = 4,821, 1500 contracts x 321.4 = 4,821).
On your daily statement the stock split will appear under Ledger Activity as
Corp Action: Consolidation of ZZZ
X for Y
(Where ZZZ is the company, X and Y are the terms of the stock split).
Rights issues
With a Rights Issue a company will offer its shareholders a chance to buy newly issued shares, usually at a discounted price, before it is offered to the public.
RBS Spread Trading will endeavour to contact customers detailing the necessary actions.
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