What is a corporate action (or event)?
It’s activity that materially changes an organisation and impacts its stakeholders and shareholders. These events are normally approved by the company's board of directors. Sometimes shareholders are permitted to vote on some events and some corporate actions require shareholders to submit a response.
Examples of corporate events include; stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.
How do I find out about corporate actions?
Where possible, we’ll notify you as and when these happen on your investments. Log into your Share Dealing account and select ‘Account Management’ and then ‘Important Notifications’.
If you have a question regarding corporate events please read the below before contacting us as we’ve included the answers to questions you ask us the most.
1. Tender Offers & Dutch Auctions
A Tender Offer is a cash offer to all shareholders for their shares. Often this is used when a company wants to buy back some of their own shares. The company will usually be looking to buy back a certain number of their shares and will ask shareholders if they would like to offer their shares for tender. This may be at a fixed price or it may be at a price calculated by the company’s net asset value on a given date.
A Dutch Auction gives shareholders the option to choose a price at which to tender their shares within a range. The company will then look at the offers and set a ‘strike price’ (an agreed price for the company to buy shares from the shareholder). Everybody who has offered their shares on or below this price will have tendered their shares. All shareholders will receive the strike price even if their original offer was lower than this.
The number of shares that can be tendered will vary. There may be a set number which are guaranteed to be tendered, known as the basic entitlement. You may be able to offer more shares, however your offer may be scaled back depending on how many people have decided to participate. In the case where a strike price is set, a lower original offer is more likely to be completed in full.
When a rights issue takes place, shareholders are given the option to purchase additional shares at a discounted price.
If you choose take up these rights then you'll be allocated new shares on receipt of your payment and completion of the event. These shares will become ordinary shares and will be tradeable at the current market price.
By not taking up the rights you will not lose any shares, rights are offered by a company at a discounted price in addition to your existing shares.
Please note: while you won’t lose any existing shares your share holding will become more diluted as there will be more shares on a stock market.
When a company announces a rights issue, holders of the stock will be issued ‘nil paid rights’ which each represent a ‘right’ to buy a new share.
As these ‘nil paid rights’ are tradable on the stock market, they are apportioned a value using the book cost of your total share holding.
If you choose to take up your ‘rights’ and purchase additional shares, the new shares will be given a book cost which includes both the discounted offer price you paid and the stock market value of the nil paid rights.
3. De-listing or stock suspension
This means that the company is proposing to cancel or has cancelled the listing of its shares on the stock market.
We will contact you by email or letter with further details if this happens to any of your investments.
Please note: we do not send out communications when a company’s stock is suspended however, if we receive any information such as a notice of administration then we will contact you.
Takeovers are reliant on shareholders accepting an offer by a bidding company. The offer will usually consist of money and/or shares in their company in exchange for your existing shares. The company will need to reach a pre-agreed percentage of total shareholders to agree to their offer before they can declare their takeover bid as 'unconditional in all respects’.
I had accepted the offer before it was 'unconditional in all respects'
If you agreed before the offer was declared ‘unconditional in all respects’, you will receive your cash 10 working days from when we instruct the company's registrars.
Please note: for each acceptance we combine your instructions with those of other customers so it will be approximately 10 working days from the advice date of the event.
I did not accept the offer
Once the offer is declared 'unconditional in all respects' we will write out to you and give you the opportunity to agree to the terms of the takeover.
If you agree to the terms of the takeover you will usually receive the money within ten working days from the date we receive your instruction. This money will be transferred into your share dealing account.