8.1 – Corporate Actions and Its Impact
Corporate actions are initiatives taken up by a corporate entity that brings in a change to its stock. An entity can choose to initiate many types of corporate actions. A good understanding of these corporate actions gives a clear picture of the company’s financial health and determines whether to buy or sell a particular stock. We will learn more in this video.
In the following video, we will learn the different order types.
We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Corporate actions have an impact on stock prices.
- Dividends are a means of rewarding shareholders. The dividend is announced as a percentage of the face value.
- If you aspire to get the dividend, you must own the stock before the ex-dividend date.
- A bonus issue is a form of the stock dividend. This is the company’s way of rewarding the shareholders with additional shares.
- A stock split is done based on the face value. The face value and the stock price change in proportion to the change in face value
- A rights issue is how the company raises fresh capital from the existing shareholders. Subscribe to it only if you think it makes sense
- Buyback signals a positive outlook of the promoters. This also conveys to the shareholders that the promoters are optimistic about the company’s prospects.