Corporate actions are official events and decisions of the issuing company that may affect securities, their holding terms, and trading status. They are most often taken at shareholder meetings or as part of mandatory procedures stipulated by law and stock exchange rules.
Below are the main types of corporate actions an investor may encounter.
1. SOFF - Spin-off
(Corporate Action: Corporate Restructuring - Spin-off)
A spin-off is a business restructuring in which a new, independent company is established from a parent company. Shareholders receive shares in the new company pro rata their stake.
This does not require any action of the investor; the distribution occurs automatically.
The investor may gain another security in their portfolio, as the distribution rules are approved at a shareholders' meeting, and the new company begins trading under its own ticker symbol and with a separate ISIN.
2. CHAN - Material Changes to Security
(Corporate Action: Change in Security Parameters)
This corporate action reflects changes in the security's parameters or issuer information: name and registration information changes, adjustments to the terms of the securities issue, and ISIN replacement.
The market value of the security typically remains unchanged, but its identifying parameters are updated. All changes are reflected in the Broker Reports. No further investor's action is required.
3. MRGR - Merger or Acquisition of Companies
(Corporate Action: Corporate Restructuring - Merger / Acquisition)
A merger or acquisition involves the combination of assets of two or more companies. Shares may be converted automatically, exchanged voluntarily (if an option is provided), or partially compensated with cash payments.
The terms of the conversion are approved by the general meeting of shareholders. Upon the transaction is completed, the shares of the former company may be cancelled, and the investor receives new shares or cash compensation in exchange.
4. CONV - Conversion of Securities
(Corporate Action: Conversion of Securities)
Conversion is the exchange of one security for another. The most:
- Convertible Bonds → Common Shares;
- Depositary Receipts → Issuer's Shares.
Conversion may be voluntary. The issuer discloses the terms of the exchange in advance, and the final decision is determined by the terms of the issue and approved at a meeting.
5. ACTV - Unblocking of Securities
(Corporate Action: Lifting Restrictions on Trading)
Unblocking is the restoration of the ability to trade securities that were previously restricted. Restrictions may have arisen due to corporate actions, court rulings, or technical or regulatory reasons.
Once the block is lifted, the securities are again available for trading. No further investor's action is required.
6. SUSP - Trading Suspension
(Corporate Action: Trading Suspension)
Trading in a security is temporarily suspended on the stock exchange.
The reasons may include:
- Corporate actions (corporate restructuring, split, dividend payments);
- Regulatory decisions (The Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market, AFSA);
- Technical failures or judicial blocking;
- Violations by the issuer.
During the suspension, buying and selling are impossible. Trading may resume once the reasons are resolved.
7. DLST - Delisting
(Corporate Action: Delisting)
Delisting means a removal of a security from the official list of stock exchange. It can be:
- Voluntary - originated by the issuer;
- Forced - according to decision of the stock exchange or regulator.
Upon delisting:
- Security can be traded over-the-counter (OTC);
- Investor retains ownership rights;
- Issuer is required to disclose information to holders.
8. BRUP - Bankruptcy
(Corporate Action: Bankruptcy of Issuer)
Bankruptcy means that the issuer is unable to meet its financial obligations.
Trading in securities may be temporarily suspended or terminated. Further payments may be made in the event of liquidation; final decisions depend on the court and the bankruptcy proceedings.
9. LIQU - Liquidation Payments
(Corporate Action: Liquidation - Payments)
When a company is liquidated, investors may receive cash or securities. Payments are made after creditors are settled and depend on the terms of the liquidation.
10. DFLT - Bond Default
(Corporate Action: Issuer Default)
Default means the issuer's failure to meet its bond obligations (interest or par value).
It may lead to debt restructuring and affect the security's value and liquidity. Specific terms are determined by the bond agreement.
11. INFO - Information Events
(Corporate Action: Information Announcement)
There are events that do not require investor action but contain important information: financial statements, management changes, legal notices, and announcements of upcoming corporate actions.
12. REDO - Redenomination
(Corporate Action: Change in Par Value)
A change in the par value of securities or the currency of the par value.
For example, converting the par value from one currency to another.
13. WRTH - Write-off of Impaired Securities
(Corporate Action: Write-off of Securities)
Write-off of securities is used if they are deemed worthless, delisted, due to the bankruptcy of the issuer, or are no longer marketable.
Important!
In this section, the examples provided by Freedom Finance PLC (hereinafter referred to as the Company) are hypothetical, illustrative, and intended to provide a general explanation of the relevant provisions. These examples are not intended to apply to specific circumstances, do not take into account the individual circumstances and conditions of the Client, and should not be relied upon as the basis for making any investment or other decisions.
The Company assumes no liability for the accuracy, completeness, or interpretation of the information provided, or for any losses the Client may incur as a result of its use. The Company also assumes no liability for any consequences of investment decisions made by the Client based on this information.
More detailed risk information is available in Annex 4 of the Brokerage Services Regulations, which is posted on the Company's official website.