Corporate Action ​
A Corporate Action is an event initiated by a company that affects its shareholders or bondholders. It usually requires investors to take notice, and sometimes to make a decision.
Three main types of corporate actions
- Mandatory Corporate Actions
Shareholders do not need to take action; the event happens automatically. Examples:
Dividends (cash or stock)
Stock splits / reverse splits
Mergers or acquisitions (when shareholders automatically receive shares or cash)
- Voluntary Corporate Actions
Shareholders choose whether to participate. Examples:
Rights issues (option to buy new shares at a discount)
Tender offers (offer to sell shares back to the company)
Dividend reinvestment plans (DRIPs)
- Mandatory with Choice
Event is mandatory, but investors can choose between several options. Example:
A company offers either cash or shares as consideration in a merger.
Why corporate actions matter
They can:
change the number or value of shares you own
affect the company’s structure
influence the stock price
require decisions that impact your investment return