What are corporate actions?
A corporate action is a company event that significantly affects stakeholders like shareholders or creditors. These actions usually require approval from the board and shareholders.
For example: - dividend,
- stock split,
- merger and demerger,
- spin off,
- tender offers for buyback,
- bonus issue,
- rights issue, etc.
To know about any corporate actions of the current financial year, check this list.
What is a demerger?
A demerger is when a company restructures itself by separating one of its business units into a new, independent company. The newly formed company may or may not get listed on the stock exchange, and shareholders of the original company may or may not receive shares in the new company. Demergers can take various forms, such as spin-offs, split-offs, or slump sales.
What is a spin-off? How does it impact the value of the stock?
Spinoff refers to a situation where a company separates one of its divisions into a new and independent entity. The shareholders of the original company receive shares in the newly created company. The value of these new shares depends on various factors such as new companies’ strength, the terms of spin-off, overall market condition, etc.
What is a merger? How does it impact the value of the stock?
Mergers refers to a situation where two companies combine to form a single entity. The impact on the shares of each company depends on various factors such as the terms of the merger, the valuation of the 2 companies, the exchange ratio, the overall market conditions, etc. Usually, shareholders of the acquired company receive shares of the new and combined entity in exchange for their old shares.
What is a fractional share?
A fractional share is a portion of a stock that is less than one full share. A fractional share is usually a result of corporate actions such as stock splits or bonus shares. Fractional shares cannot be traded in the market and cannot be bought or sold. The company appoints a trustee to buy back the fractional shares from investors, and the payments are credited to the primary bank account of the client.
What are the takeovers?
A takeover is a corporate action where one company (the acquirer) aims to gain control of another (the target).
What is the book closure date?
The book closure date is the date on which a shareholder must hold the stock in their demat account to be eligible for corporate action benefits. During the book closure period, RTAs don’t process requests to transfer shares.
What does delisting mean?
Delisting is the process by which a publicly traded company’s shares are removed from a stock exchange. It can be voluntary, such as when a company chooses to go private or merges with another firm, or mandatory if it fails to meet exchange requirements. Delisting can have serious consequences, including reduced share liquidity and investor access, which is why many companies strive to avoid it. |