What are the different types of corporate actions?
There are various types of corporate actions, with the most common being:
Mergers A merger unites two existing companies into one new entity. Stockholders of both companies will receive common equity shares in the newly formed company.
Stock splits A stock split increases the number of shares available without changing the total value of your position. An example:
You own 10 shares of ABC valued at $10 each, and ABC executes a 10-for-1 stock split, you’ll now own 100 shares valued at $1 each.
Reverse splits A reverse split reduces the number of shares you own, increasing the price per share while maintaining the total value of your investment. An example:
You own 10 shares of ABC valued at $10 each, and ABC executes a 1-for-10 reverse stock split, you will now own 1 share worth $100.
Delistings Removal of a security from a stock exchange.
How do corporate actions affect trading?
Corporate actions like stock splits, reverse splits, name changes, and mergers can temporarily make your stocks unavailable for trading while changes are processed. The suspension of trading typically lasts until normal market hours on the effective date of the corporate action. Trading suspensions are subject to timely position adjustments by the DTCC and Apex Clearing.
My shares went through a split. Where did they go?
After a stock split or reverse split, you may end up with fractional shares. These fractional shares are typically handled in one of three ways:
Cash-in-Lieu: The value of the fractional share is paid out as cash into your account, typically within two to three weeks after the split. Rounding Up: The fractional share is rounded up into a full share. Rounding Down: The fractional share is rounded down to zero.
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