Corporate actions

What is a corporate action?

On occasion, some companies that you have invested in will propose an event that could affect your investment. The event is also known as corporate action.

In some cases you’ll be able to choose to participate and in other times it’ll be mandatory.

How do I respond to a corporate action?

To respond to the corporate action, you’ll need to log on to your account and select ‘Corporate actions’ and then ‘Notifications’.

If you have any questions regarding corporate actions please read our FAQs as we’ve included the answers to the questions you ask us most.

  • The special dividend

    Tesco has now completed the sale of its Thai and Malaysian businesses and now intends to pay their shareholders some of the proceeds of the sale in the form of a special dividend.

    • The special dividend will be 50.93p for each ordinary share held at the market close on Friday 12th February 2021.
    • The dividend is expected to be paid on or after Friday 26th February 2021.
    • Your normal dividend handling options will be applied to the special dividend.
    • Dividend re-investment deadline: You may want to check how your account is setup to handle dividend payments. You can change this at any time but you will need to change your handling options by Thursday 25th February to be effective for the Tesco dividend payment.
    • Our dividend re-investment charge is 2% up to £10. Please note, stamp duty tax will also apply.
    • As we are not tax advisors we are unable to provide any advice on how this will affect your personal circumstances.

    The consolidation

    A share consolidation is when a company reduces the number of shares trading on the stock exchange.

    • Tesco are proposing to consolidate to 15 new ordinary shares for every 19 existing ordinary shares held.
    • The consolidation is expected to become effective on Monday 15th February 2021.

    Example based on a share price of £2.42 (share price as at 22nd January 2021):

    • If you held 100 shares (worth £242) of Tesco before the consolidation you would hold 78 shares afterwards (worth £188.76).
    • You would receive a special dividend worth £50.93
    • Your total investment would be worth £239.69.

    Please note, the actual value may increase or decrease following the special dividend and consolidation due to movements in the Tesco share price.

    If you have any more questions

    If you have anymore questions or need anymore information on the dividend or consolidation then please contact Tesco or refer to the Tesco investors website.

How to give your instructions

 

How to get company information

 

What happens after you give your instruction

 

Main types of corporate actions

1. 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.

2. 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.

  • If a company wants to attract new shareholders but feels that its share price is too high they can arrange a stock split to lower the stock’s price, making shares more affordable.

3. Mergers

4. Spin-off

Corporate action takeaways

  • A corporate action is an event carried out by a company that impacts its stakeholders.
  • Common corporate actions include the payment of dividends, stock splits, tender offers, and mergers and acquisitions.
  • Corporate actions are normally approved by a company's shareholders and board of directors.

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 under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.

Important share dealing information