Corporate action definition
Corporate action
A corporate action is an effort made by a public company to alter or change its securities (equity or debt). Corporate action is agreed on by the company’s board of directors with authorization from shareholders.
For most events, shareholders and or bondholders get to vote on corporate action proposals.
Types of corporate action
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.