A corporate action is an activity that brings material change to an organization and impacts its stakeholders, shareholders, as well as bondholders. These events are generally approved by the company's board of directors. Sometimes shareholders may be permitted to vote on events. Some corporate actions require shareholders to submit a response which Stockpile and our clearinghouse APEX will help administer.
We keep track of corporate actions as best we can and provide a list here.
A stock split is a decision by a corporation to increase or decrease its number of outstanding common shares. Stock splits are typically considered 'mandatory.'
When a corporation decides to execute a forward stock split, the number of outstanding shares will increase while the stock's price will decrease; the overall market value of the position will stay the same. This means that you will see the number of shares you own in the corporation increase, though the value of each individual share will decrease proportionally.
For example, if you own 10 shares of COMPANY stock valued at $10 each, and COMPANY executes a 10 for 1 (10:1) stock split, you will now own 100 shares valued at $1 each. After the completion of the forward stock split, the value of your shares will fluctuate based on market conditions.
Similarly, when a corporation initiates a reverse stock split, the number of outstanding shares will decrease while the market value for each of those individual shares will increase.
For example, if you own 100 shares of COMPANY stock valued at $10 each, and COMPANY initiates a 1 for 10 (1:10) reverse stock split, you will now own 10 shares worth $100 each. After the completion of the reverse stock split, the value of your shares will fluctuate based on market conditions.
If a stock split results in fractional shares, don't worry... Stockpile already supports fractional shares, so you will receive the corresponding fractional shares in your account. If the transfer agent does not allow for fractional shares resulting from a stock split, you will receive one form of payment: a cash-in-lieu payment proportional to the value of the fractional shares owned; additional shares based on a roundup of any fractional share to a full share; or nothing, depending on the corporation’s mandate.
Sometimes a corporation will choose to acquire another corporation. The buying corporation may choose to undergo a cash merger & liquidation or stock merger.
Cash Merger & Liquidation: Company X purchases Company Y and declares Company Y shareholders will receive $10.00 for every 1 Y share they owned. Company Y common stock stops trading, and Y shareholders are paid cash instead.
Stock Merger: Company X purchases Company Y and declares that Company Y shareholders will receive 2 shares of X for every 1 share of Y they owned. Company Y common stock stops trading and Y shareholders now own X shares instead.
Cash-in-Lieu is a cash payment made to owners of fractional shares that result from corporate actions (like stock splits and mergers and acquisitions). The cash rate is predetermined by the corporation and can be found on the corporation’s corresponding SEC 8-K document.
You should expect cash-in-lieu payments to settle in your Stockpile account 3-4 weeks after the corporate action has been completed. Confirmation of this payment can be found in your monthly account statements.
A corporation can choose to create a new, independent company under its umbrella. The original corporation may choose to issue common shares of the new independent company to its previous shareholders.
Example: Company X spins-off Company Y. Company X decides to issue common stock of Company Y to shareholders who owned shares of X by a predetermined date.
Delisting simply refers to a stock’s removal from an exchange. Oftentimes when we refer to a stock’s delisting, we mean that it has been removed from a major exchange we support and now trades on the OTC (over the counter) markets. Stockpile currently does not offer trading on OTC markets.
How do I participate?
The issuing company determines the terms of corporate actions and how stockholders will be compensated for fractional shares.
Stock splits, mergers, and acquisitions are processed by our Corporate Actions team in concert with our clearing partner, APEX. All necessary adjustments will be made to your portfolio in a timely manner.
Please keep in mind that stocks going through a corporate action can be restricted from trading while the Corporate Actions team works to process these changes.