A corporate action is any action taken by a corporation that affects its shareholders. There are many different types of corporate actions. Common corporate actions include the payment of dividends, stock splits, tender offers, and mergers and acquisitions.
This article covers the following topics:
- How to deal with dividends and other corporate actions (Video)
- Where do I find corporate actions in my account?
- Mandatory and Voluntary corporate actions
- Information regarding a corporate action
- How do I elect in a voluntary corporate action?
- Corporate actions events
How to deal with dividends and other corporate actions
Where do I find corporate actions in my account?
On our platforms you will find your corporate actions by navigating to the main menu > Corporate Actions > Events > Active/Past.
If you see corporate actions on your CFD positions and wish to learn more, please visit What are CFD Cash Adjustments?
Mandatory and Voluntary corporate actions
For each corporate action, you can see whether it is mandatory or voluntary.
- Mandatory corporate actions are events that you cannot influence and therefore no action is needed from your side. An example of this could be dividend payments.
- Voluntary corporate actions are events in which you can elect among 2 or more options. An example of this could be the issuing of a new stock (share issue), where as a shareholder you can elect whether to buy more stock at a certain price.
You can sort your corporate actions into Active, and Past.
- Active: These corporate actions are active. If it is a voluntary event, you can elect between 2 or more options. If you do not elect before the deadline, we automatically elect the default option.
- Past: These corporate actions are completed or withdrawn and you can take no further action.
NOTE: If you wish to see your Upcoming corporate actions, click on the filter and select Show upcoming events. These upcoming events are usually unconfirmed events and are subject to change until confirmed.
Information regarding a corporate action
You'll find information regarding a specific voluntary corporate action by clicking a particular grid of an event.
How do I elect in a voluntary corporate action?
1. Navigate to Active Corporate Actions and click on Elect.
2. In the pop-up window, you will find the tabs Election and Details under which you can see below information:
- Event: The type of corporate action (Read more under the Types of events section.)
- Election status: Here you'll see whether you have elected or not.
- Payout in: You will be able to make the voluntary election from the dropdown. This will include Cash, Securities, Cash and Securities in case you want to receive part cash and part securities. dropdown will only apply for 2 Event types (which are some of the most common) that is 1) Dividend Reinvestment and 2) Dividend Option. Each has a binary choice of either cash or securities. For all other voluntary event types, you need to still elect by putting in the amount.
- Account: The account on which your instruments are held.
- Eligible holdings: The number of holdings (such as shares or rights) you can elect with.
- Event narrative: The additional text where you will find information related to the event. Click on download PDF to see the text.
- Details: Here you'll see the narrative with other event information and will be able to download it.
3. At the bottom, you can see your election options. You elect by entering the quantity of "eligible holdings" you wish to use under each option and clicking Apply election. After the reply deadline, any unused holdings will automatically be placed under the Default option.
Dividends and Accruals
You can see a full overview of pending payouts from corporate actions, i.e. payouts that has not been booked on their account yet. Once they have been booked, the event will disappear from the Dividends and Accruals tab. This will include Event type, Instrument, Charges deducted, Booked amount etc.
Corporate actions events
There are many different types of events. Down below you will find descriptions of some of the most common types of events.
- Cash dividend
- Stock dividend with reinvestment option
- Call of intermediate instruments (Share issue)
- Spin-off
- Stock split
- Delisting
- Other types of events
Cash dividend
A Cash Dividend is a payment made by a company from its earnings to its investors. The amount is credited to the account in which the underlying shares are held. This happens on the payment date, which you can find on the corporate action page. Dividends are paid after deduction of any applicable dividend tax. You can read more about dividend tax here. Most often, cash dividends are mandatory.
Stock dividend with reinvestment option
Some companies offer the chance to reinvest dividends in the form of a Dividend Reinvestment Plan (DRIP), as an alternative to cash dividends. In this case, the event will be voluntary as it provides the possibility to choose between having the dividends paid in cash or in the form of new shares. If the latter is chosen, the dividend amount will be used to buy new shares and any remaining fractional shares will be paid in cash.
If you consistently wish to choose the payment of dividends in cash or in stock into your account, you can set up a "Dividend Instruction" on the corporate action section of our platforms - click here to see how.
After setting up a Dividend Instruction, the dividend will be automatically paid out in cash or reinvested when there is a voluntary corporate action.
Call on Intermediate Securities (rights issue)
A rights issue gives shareholders the opportunity to buy additional shares in the company at a specified price. There are several things you should be aware of in a rights issue:
Issuing of rights
First, as a shareholder, you receive rights based on your shareholding as of a specific ex-date. The rights "XXXX - Rights" will appear on your position list.
Possibility to subscribe
A rights offering allows you to buy a number of shares per right within a given period and at a specified price. If you wish to buy shares, enter the number of rights you wish to exercise and press apply choice. After the response period, any unused rights will automatically be placed under the (Default) option.
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Example 1 Let us pretend that you have to use 2 rights to buy 1 new share. When you have 50 rights, you can therefore buy 25 shares (50/2). So if you want to buy 20 shares, you will enter: In this case, you would have 10 rights left unused. If you don't wish to buy any new shares, you don't need to take any further action. |
Let's look at another example:
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Example 2 Eligible holding: 32 1: Exercise (i.e. buy new stock using your rights) 1: Lapse (default) (i.e. you do not buy new stock) |
- In the above example, you can buy a maximum of 5 shares (32/6 = 5,3)
- You have to use 6 rights for 1 share. You will be distributed 32 rights and the purchase price is USD 10 per share.
- If you want to purchase the maximum possible amount of shares (5 shares), you will need to use 30 rights (5*6)
- In this case, if you buy 5 shares, the combined price is USD 50 (5*10 USD).
- If you purchase these 5 shares, there will be 2 unused rights leftover as you have 32 rights but can only use 30.
Purchase and sell of rights
In the above example, you would have 2 rights left, which you cannot use. You can sell unused/leftover rights depending on whether the rights are transferable or non-transferable.
Non-transferable rights cannot be bought or sold. Transferable rights can generally be traded. If you have difficulties trading them on platform, please contact us.
Response deadlines and technical requirements
If you do not elect anything before the response deadline, your rights will be sold on your behalf if possible before the expiration of the rights. Please note that this will only happen to positions with a value exceeding 30 EUR and is not offered for APAC-listed securities and subscription warrants on the Portuguese market.
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Please note that for the APAC region, Portuguese and Belgium market, we will not initiate the sell of your unexercised rights. You may sell it. Unexercised rights will then be debited worthless from your portfolio. If the issuer pays lapse/bookbuild proceeds on unexercised rights then you will be credited accordingly. Additionally note the following:
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If you wish to exercise your rights, be sure to provide instructions in the multiple specified. In the example above, 6 rights per share would be multiple. Therefore, the number of rights you choose to use should add up to 6. In the example above, the number of rights used was 30 (6*5). If you do not elect in the correct multiple, the instructions may be rejected.
For certain corporate actions, oversubscription is possible. This means that you can request to buy more shares than you are entitled to. To do this, you must first elect the maximum number of rights possible under "Exercise". Then you elect for the remaining rights (still in the correct multiple) under "Oversubscription". It is not guaranteed that the oversubscription will be approved.
Funding requirement
You will have to ensure that the account with the rights has sufficient cash to cover the cost of buying the new shares. The information which you will find by clicking "i" will state the date that you will be required to have the necessary cash. If you do not have enough cash on the account when it is required, your election will be rejected without prior notice.
End of event
After the event deadline, it can take some time for the rights to be converted into shares or sold and removed from the position overview.
Is it a good idea to elect "exercise" and buy new shares?
Unfortunately, there is no right answer for this, as it depends on the specific event and your personal preference. You need to decide for yourself, whether you wish to buy more shares or not.
Spin-off
In a spin-off, an independent company is created through the sale or distribution of new shares of an existing business or division of a parent company. The two companies are expected to be worth more as independent entities compared to before (when they were one company).
The parent company's stock will decrease in value after the spin-off and shareholders will receive an equivalent amount of stock in the new company as compensation.
Stock split
A stock split is when a company divides its existing stock into multiple new shares. This means that if a shareholder had one share in a company, after a stock split they will have multiple shares. The price per share will fall but the combined value will remain the same (assuming the share price is not affected). The percentage of the company that you own will therefore remain the same.
A reverse stock split sees the opposite happen; multiple stocks are merged into a smaller amount of shares, but the percentage of the company that you own will remain the same.
Delisting
If an instrument is delisted, it means that the instrument is no longer available to trade on the exchange on which it was listed. In some cases, this is because the company has gone bankrupt. In other cases, it could mean that the company has moved to another exchange or merged with another company. For more information, please read on the company/issuer's website. Alternatively, you can write, chat or call our client service and we would be happy to assist you.
Bond holder meeting and consent event
Currently, the data providers of Saxo are unable to support Bond holders meetings and consent events, thereby restricting our ability to provide these experiences to our valued Bond holding clients. It is crucial to understand that these events may occasionally entail a participation fee, serving as a form of appreciation for clients. However, in such cases, we cannot assure your participation or offer compensation for any associated fees.
Nevertheless, should we receive timely requests from our bond holding clients at least one day before the deadline, we will put forth our best efforts to facilitate participation in these events.
Other types of events
There are many more types of corporate events than those mentioned above. You can read more about corporate actions on our website.