Dividends
A dividend is the distribution of a company's earnings to its shareholders. Dividends are often paid out as cash and distributed quarterly.
To receive a dividend, you must own or purchase a dividend receiving stock before its ex-dividend date.
Example:
Ex-Dividend Date | Record Date | Payable Date |
Monday, 5/16 | Wed, 5/18 | Friday, 6/30 |
The ex-dividend date of ABC is on Monday 5/16. In order to receive the dividend, the latest you need to buy ABC is 1 pm PT on Friday, 5/13, and the earliest you can sell it is 6:30 AM PT on Monday 5/16.
Forward Stock Split
A Forward Stock Split occurs when a company increases the number of shares it has outstanding in the market. This will have no impact on the total value of your position as the stock’s market price will adjust.
For example, you own 100 shares of ABC at $10 per share (total value of $1,000) and ABC undergoes a 10 for 1 (10:1) forward stock split. After the split, you will own 1,000 shares of ABC at $1 a share (remaining at a value of $1,000).
Reverse Stock Split
A Reverse Stock Split occurs when a company reduces the number of shares it has outstanding in the market. This will have no impact on the total value of your position as the stock’s market price will adjust.
For example, you own 100 shares of ABC at $10 per share (total value of $1,000) and ABC undergoes a 1 for 10 (1:10) reverse stock split. After the split, you will own 10 shares of ABC at $100 a share (remaining at a value of $1,000).
Mergers & Acquisitions
When a company merges with or acquires another company, shareholders of the company being merged with or acquired can receive shares, cash or a combination of the two as payment for the shares of the company being merged with or acquired.
Stock Merger
Firm ABC decides to buy out firm XYZ:
Firm ABC decides to issue 1 share of ABC stock for every 10 shares of XYZ that shareholders own. Once the shares are paid, XYZ stops trading.
Cash Merger
Firm ABC decides to buy out firm XYZ:
Firm ABC decides to pay $10 for every share of XYZ that shareholders own. Once the cash is paid, XYZ stops trading.
Cash & Stock Merger
Firm ABC decides to buy out firm XYZ:
Firm ABC decides to pay $10 and 2 ABC shares for every 10 shares of XYZ that shareholders own. Once the cash and shares are paid, XYZ stops trading.
Delisting (OTC stocks)
A delisting occurs when a symbol is halted and removed from trading on an exchange. Oftentimes, delisted symbols begin trading on OTC markets.
If you own a delisted symbol, you may transfer it out to another broker or reach out to support to assist with liquidation. You cannot purchase OTC traded symbols or borrow against them.
Voluntary Corp Actions
A company may participate in a voluntary corporate action for its shareholders. This action may include the company repurchasing shares or selling newly issued shares at a specified price. These offers are typically only for existing shareholders and may come with an expiration date for the offer. Below are a few examples of voluntary corporate actions:
Tender offer
A tender offer allows existing shareholders to sell their shares (aka tender their shares) at a specified price. Existing shareholders will receive a notice and terms of the tender via mail or email. If you receive a notice, you are not obligated to tender your shares.
If you do wish to tender your shares please contact support with your instructions 1 business day before the tender expiration, which can be found on your notice. Instructions submitted after are processed on a best effort basis.
Rights offering
When a company decides to offer new shares of an existing stock to the public, they can issue a rights offering. A right will offer existing shareholders the chance to purchase shares of the new offering at a determined price before they are offered to the public. Rights have an expiration date and are usually issued for a short period of time.
Warrants
A warrant is an asset that allows its owner to buy stock in the company that issued the warrant at a fixed price, called the exercise or subscription price. Warrants are usually issued for a longer term, with an expiration date several years in the future.
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