{"id":5716,"date":"2021-11-16T17:39:33","date_gmt":"2021-11-16T12:09:33","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=5716"},"modified":"2023-05-03T18:22:35","modified_gmt":"2023-05-03T12:52:35","slug":"corporate-actions","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/corporate-actions\/","title":{"rendered":"Corporate Actions \u2013 Meaning, Types, and Examples"},"content":{"rendered":"\n<p>Any event or decision by the management of public-listed companies that has the potential to influence the securities issued by the company \u2013 <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> or debt \u2013 qualifies as corporate action. Because of the potential impact on investments or holdings of investors, corporate action remains one of the keenly watched spaces among investors. In this article, learn about corporate action, its working and types of corporate actions with examples.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#What-is-a-corporate-action\" title=\"What is a corporate action?\">What is a corporate action?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#How-does-it-work\" title=\"How does it work?\">How does it work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Types-of-corporate-actions\" title=\"Types of corporate actions\">Types of corporate actions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Examples-of-corporate-actions\" title=\"Examples of corporate actions\">Examples of corporate actions<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Mandatory-action\" title=\"Mandatory action\">Mandatory action<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#1-Stock-split-and-reverse-stock-split\" title=\"1. Stock split and reverse stock split\">1. Stock split and reverse stock split<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#2-Bonus-issue\" title=\"2. Bonus issue\">2. Bonus issue<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#3-Merger-and-acquisition\" title=\"3. Merger and acquisition\">3. Merger and acquisition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#4-Spin-offs\" title=\"4. Spin-offs\">4. Spin-offs<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Mandatory-action-with-several-options\" title=\"Mandatory action with several options\">Mandatory action with several options<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Dividend-payout\" title=\"Dividend payout\">Dividend payout<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Voluntary-action\" title=\"Voluntary action\">Voluntary action<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#1-Buyback\" title=\"1. Buyback\">1. Buyback<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#2-Rights-issue\" title=\"2. Rights issue&nbsp;\">2. Rights issue&nbsp;<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#FAQs\" title=\"FAQs\">FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#Where-can-we-get-the-information-on-any-corporate-action-from-any-company\" title=\"Where can we get the information on any corporate action from any company?\">Where can we get the information on any corporate action from any company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#What-are-mandatory-corporate-actions\" title=\"What are mandatory corporate actions?\u00a0\">What are mandatory corporate actions?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tickertape.in\/blog\/corporate-actions\/#What-are-voluntary-corporate-actions\" title=\"What are voluntary corporate actions?\">What are voluntary corporate actions?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-a-corporate-action\"><\/span><strong>What is a corporate action?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any action by a public-listed company that causes a significant change or has the potential to create a change in the securities issued by the company and influences its stakeholders is called corporate action.&nbsp;<\/p>\n\n\n\n<p>When a publicly-listed business takes corporate action, it starts a process that impacts the price of securities it has issued. Corporate activities can range from severe financial issues like bankruptcy and dissolution to changing the title or trade symbol.<\/p>\n\n\n\n<p>Corporate activities include dividends, spin-offs, stock splits, mergers, acquisitions, and management changes. A firm\u2019s proxy statement, issued before a public company\u2019s annual meeting, generally includes corporate actions requiring shareholder approval.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How-does-it-work\"><\/span><strong>How does it work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Publicly listed firms are usually governed by a board of directors, which comprises individuals intimately associated with the company and are appointed to various roles.&nbsp;<\/p>\n\n\n\n<p>The board must approve any corporate action of directors, which is usually done by a vote. In certain circumstances, <a href=\"https:\/\/www.tickertape.in\/blog\/shareholders\/\">shareholders<\/a> can vote on some or all of the company\u2019s corporate actions.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types-of-corporate-actions\"><\/span><strong>Types of corporate actions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following are the three fundamental categories of corporate actions:<\/p>\n\n\n\n<ol><li><strong>Mandatory<\/strong><\/li><\/ol>\n\n\n\n<p>The board of directors of a corporation is responsible for mandatory corporate actions. For example, the issue of a cash <a href=\"https:\/\/www.tickertape.in\/blog\/cash-dividend-vs-stock-dividend\/\">dividend<\/a> is a necessary activity that affects all of the company\u2019s owners. The company\u2019s governing body carries out the action. Other required acts include spin-offs, stock splits, and mergers. As the term \u201cmandatory\u201d suggests, the shareholders need to accept the action made.<\/p>\n\n\n\n<ol start=\"2\"><li><strong>Mandatory (with several options)<\/strong><\/li><\/ol>\n\n\n\n<p>Mandatory corporate actions with alternatives provide shareholders with various choices. For example, take dividends issued by a company. The firm can give dividends in stock or cash, with the latter being the default choice. But here, the shareholders can select a dividend payment method.<\/p>\n\n\n\n<ol start=\"3\"><li><strong>Voluntary<\/strong><\/li><\/ol>\n\n\n\n<p>Voluntary corporate actions are activities in which shareholders choose to take part. A tender offer or <a href=\"https:\/\/www.tickertape.in\/blog\/reliance-announces-rights-issue-what-it-means-to-investors\/\">rights issue<\/a> is an excellent example of voluntary corporate action.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Examples-of-corporate-actions\"><\/span><strong>Examples of corporate actions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mandatory-action\"><\/span><strong>Mandatory action<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1-Stock-split-and-reverse-stock-split\"><\/span><strong>1. Stock split and reverse stock split<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A company may decide to go for a <a href=\"https:\/\/www.tickertape.in\/blog\/stock-split\/\">stock split<\/a> or reverse stock split. A stock split is a situation in which a corporation declares that its shares\u2019 face value will be divided. The stock\u2019s market price may decline due to this practice, while the company\u2019s <a href=\"https:\/\/www.tickertape.in\/blog\/market-capitalization\/\">market capitalisation<\/a> remains unchanged. A reverse stock split, alternatively, has the opposite effect. It is used to raise share prices by decreasing the number of outstanding shares.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2-Bonus-issue\"><\/span><strong>2. Bonus issue<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>These are free shares that the company\u2019s shareholders get in exchange for the shares they hold. The reserves in shareholder funds are used to issue <a href=\"https:\/\/www.tickertape.in\/blog\/bonus-shares\/\">bonus shares<\/a>. Companies announce the ratio by which new shares are distributed to existing stockholders. The number of shares issued rises when bonus shares are given, but the overall value of the shares remains the same.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3-Merger-and-acquisition\"><\/span><strong>3. Merger and acquisition<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A merger happens when two or more ventures agree to join to expand their operations and profits. Similarly, an acquisition occurs when a more prominent firm buys or overtakes a smaller company.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4-Spin-offs\"><\/span><strong>4. Spin-offs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Corporate spin-offs happen when a company, for reasons of expanding or new acquisitions, \u2018spin-off or \u2018separates\u2019 a part of its company to create a parallel venture.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mandatory-action-with-several-options\"><\/span><strong>Mandatory action with several options<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Dividend-payout\"><\/span><strong>Dividend payout<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Most financially sound firms pay their shareholders a part of their profits in the form of dividends. This is, however, not a compulsion for the firm. The company may choose to reinvest the profit to further growth. When it is issued, shareholders can select either cash dividends or stock dividends. If the shareholders don\u2019t submit their preference within the prescribed time, then the default option is applied \u2013 which is cash dividends.<\/p>\n\n\n\n<p>Use Tickertape to find the cash dividend paid by a listed company.&nbsp;<\/p>\n\n\n\n<ul><li>Log in to <a href=\"https:\/\/www.tickertape.in\/?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape<\/a><\/li><li>Launch the <a href=\"https:\/\/www.tickertape.in\/screener\/equity?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=\" target=\"_blank\" rel=\"noreferrer noopener\">Stock Screener<\/a>\u00a0<\/li><li>Click on \u2018Add Filter\u2019<\/li><li>Search and select \u2018Total Cash Dividend\u2019<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Voluntary-action\"><\/span><strong>Voluntary action<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1-Buyback\"><\/span><strong>1. Buyback<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A firm might offer to buy back its shares from current stockholders if it believes the price is too low or has excess money that it cannot put to good use. Buybacks lower the number of shares in circulation, resulting in higher EPS.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2-Rights-issue\"><\/span><strong>2. Rights issue&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A firm does this by issuing new shares to all current stockholders in proportion to their stake in the company. Often, new shares are given at a discount to encourage shareholders to apply for the offering. For example, in a 3:1 rights issue, a stockholder can purchase one share for every three shares he holds in the firm.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Corporate action is any action performed by a corporation, usually by its board of directors, that substantially impacts the firm and its shareholders. Investors need to keep an eye on all the updates happening in the financial world to profit from corporate actions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span><strong>FAQs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1674534752973\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"Where-can-we-get-the-information-on-any-corporate-action-from-any-company\"><\/span><strong>Where can we get the information on any corporate action from any company?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Any corporation action will be informed to the shareholders by the company. Alternatively, you can also know the corporate announcements on <a href=\"https:\/\/www.tickertape.in\/blog\/national-stock-exchange\/\">NSE<\/a> and BSE official websites.\u00a0\u00a0<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1674534760759\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What-are-mandatory-corporate-actions\"><\/span><strong>What are mandatory corporate actions?\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Corporate actions which are mandatory that every shareholder needs to abide by are called mandatory corporate action. For example, mergers, stock-splits, and issuing cash dividends are mandatory corporate actions.\u00a0<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1674534775476\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"What-are-voluntary-corporate-actions\"><\/span><strong>What are voluntary corporate actions?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Voluntary corporate actions are the ones which are not mandatory, and shareholders have a choice to opt or deny. Voluntary corporate actions examples are rights issues or tender-offer.\u00a0<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Want to know what are the different types of corporate actions and what impact they have on stock price? Click here to read about corporate actions and things to know as an investor.<\/p>\n","protected":false},"author":136,"featured_media":5720,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1725],"tags":[],"acf":[],"modified_by":"Anjali Chourasiya","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/11\/13.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5716"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/136"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=5716"}],"version-history":[{"count":6,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5716\/revisions"}],"predecessor-version":[{"id":11785,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5716\/revisions\/11785"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/5720"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=5716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=5716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=5716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}