What are corporate actions?
It’s activity that materially changes an organisation and impacts its stakeholders and shareholders. These events are normally approved by a 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; consolidations, subdivisions, takeovers, mergers and acquisitions, rights issues and open offers.
How do I find out about corporate actions?
Where possible, we’ll notify you as and when these happen on your investments. Log on to your Share Dealing account and select ‘Corporate actions’.
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 and Dutch Auctions
A Tender Offer is used when a company wants to buy back some of their own shares. The company will offer cash to all shareholders if they would like to offer their shares for tender. This could be a fixed price or a price calculated by the company’s net asset value on a given date.
A Dutch Auction allows shareholders 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 the strike price will have tendered their shares. All shareholders tendering their shares receive the strike price even if their original offer was lower than this.
The number of shares that can be tendered varies. There may be a given number guaranteed to be tendered, this is 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.
2. Rights issues
When a rights issue takes place, shareholders have the option to purchase additional shares at a discounted price.
If you choose to action these rights then you'll be allocated new shares on receipt of your payment and completion of the event. These shares will then become ordinary shares and will be tradeable at the current market price.
By choosing not to action these 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 allocated a value using the book cost of your total share holding.
When choosing 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 proposes to cancel or has cancelled the listing of its shares on the stock market.
We will email you or send a letter in the post with further details if this happens to any of your investments.
Please note: Communications are not sent out 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 rely on shareholders accepting offers from a bidding company. An offer will usually consist of money and/or shares in their company in exchange for your existing shares. The company needs 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’. Wholly Unconditional in all respects means the bidder has met all conditions, for example set by regulators, and so the takeover is now definitely going ahead.
I accepted the offer before it was 'unconditional in all respects‘
If you agreed before the offer was declared ‘wholly unconditional in all respects’, you receive your cash 14 working days from when the takeover becomes wholly unconditional in all respects.
I did not accept the offer
Once the offer is declared 'unconditional in all respects' we will write 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 then be transferred to your share dealing account.
5. Stock splits
A company may decide to split its stock into new shares to increase its liquidity on the market, this usually happens when the share price is very high and makes it harder for smaller investors to buy into the company. Companies will usually use a 2-for-1 or 3-for-1 ratio which means for every share you had before you would receive 2 or 3 shares.
The stock split will not add any value to your holding as the share price will decrease to accommodate the additional shares. Your valuation will still be based on the number of shares you own and the current market price.
Important legal information
The Lloyds Bank Direct Investments Service is operated by Halifax Share Dealing Limited. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Registered in England and Wales no. 3195646. Halifax Share Dealing Limited is authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.