Corporate Action Definitions
Below is provided a list of the different types of corporate actions that can occur. Each of these is used in the Global Financial Database. The definitions are provided so users who are unfamiliar with some of the corporate action adjustments can understand the impact of each.
Assessment
An assessment requires shareholders to pay money to the company. This was used primarily by railroads and mining companies to raise capital for companies over time. Shareholders were required to pay a fixed amount of money to the company by a certain date. The company might start out with a $100 Par stock and require an initial payment of $25, then additional payments of $25 until the 100 was fully paid. Failure to provide payment would cause the shareholder to forfeit his or her shares.
Cash Dividend
A cash dividend is a payment in cash to the shareholder from the company. The stock price will usually decline by the amount of the dividend on the ex-dividend date. Cash dividends are provided in the local currency, Dollars for the United States, Pounds for Great Britain, etc.
Cash Dividend – Special
A special cash dividend is a one-time cash dividend which the company does not expect to pay again in the future.
Cash Dividend – Extra
An extra cash dividend is paid in addition to the regular cash dividend. Unlike the case of a special dividend, the company expects to pay the extra dividend again in the future. At some point, the company will increase the regular cash dividend and eliminate the extra dividend.
Cash Dividend – Annual
The annual cash dividend is paid once a year and can be either a special dividend or a regular dividend.
Cash Dividend – Liquidating
A liquidating dividend is paid when the company goes out of business. Typically, assets of the company are sold and the proceeds from the sale of the assets is provided to shareholders.
Cash Dividend – Optional
An optional cash dividend can be taken in the form of either a cash dividend or a stock dividend. The shareholder can choose which to take.
Rights Distribution
A rights distribution allows the shareholder to buy additional shares from the company. A rights distribution could be 0.1 shares at $25. This means that if the shareholder provides 10 rights and $25, they will receive an additional share of stock in the company. The shareholder also has the choice of selling the rights on the open market to receive cash if the shareholder does not want to increase his or her ownership in the company. A rights distribution is used rather than a stock dividend so each shareholder’s ownership in the company is not diluted as a result of increasing the number of outstanding shares.
Stock Distribution
A stock distribution provides the shareholder with shares in ANOTHER company. When American Telephone and Telegraph broke up into Ma Bell and the Baby Bells, AT&T provided a stock distribution in the Baby Bells to all of its shareholders. A distribution in the shares of the company is a stock dividend.
Stock Dividend
A stock dividend is provided when a small number of shares is provided to shareholders, or there is no change in the par value of the stock. A 5% stock dividend would provide a shareholder who owns 100 shares in the company 5 additional shares. A 100% stock dividend would provide a shareholder of 100 shares with 100 additional shares and is effectively a 2-for-1 split.
Forward Split
A forward split increases the number of outstanding shares. A 4-for-1 forward split would give someone with 100 shares 400 shares after the split.
Reverse Split
A reverse split reduces the number of outstanding shares. A 1-for-10 reverse split would give someone with 100 shares 10 shares after the split.
Currency Split
A currency split occurs when the country replaces the old currency with a new currency. When France introduced the New Franc on January 1, 1960, it took 100 Old Francs to get 1 New Franc, thus a 1-for-100 split.
Legacy Currency Split
A legacy currency split occurs when a country replaces an existing currency with a new currency. This is mainly used for Euro currency countries. On January 1, 1999, 6.55957 French Francs were converted into 1 Euro.
Delisting
This provides information on the delisting of a company, providing information on either the cash that shareholders received in exchange for their shares or the number of shares of stock in the acquiring company that shareholders received.
Flow Adjustment – Annual
Data are recorded in either stocks or flows. Stocks, such as the value of a stock index, are values at one point in time. A flow measures the value of an economic or financial variable over time. GDP is measured in quarters, and if you sum up four quarters of GDP you obtain the annual GDP. The annual flow adjustment indicates that the calculation of the flow variable is annual before that date.
Flow Adjustment – Quarterly
The quarterly flow adjustment indicates that the calculation of the flow variable is quarterly before that date.
Flow Adjustment – Monthly
The monthly flow adjustment indicates that the calculation of the flow variable is monthly before that date.
