Corporate action definition

Examples of corporate actions include buybacks, dividend issues, stock splits, mergers and acquisitions, rights issues, and spin-offs.

With a buyback, the company agrees to buy back shares to reduce the number of shares outstanding.

A dividend is a sum of money usually paid out annually by a company to its shareholders out of its profits or reserves.

Stock splits alter a company’s existing shares. The outstanding shares number will increase by a precise multiple, and the same factor decreases the share price as the multiple.

In a merger, two or more entities merge to form a new company. Existing shareholders maintain a shared interest in the new company.

An acquisition involves a transaction where one company takes over another company, known as the target. The target ceases to exist, the acquirer takes over the target company’s interests, and the acquirer’s stock remains on the market.