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Mergers, Stock Splits, and More

Mergers, Stock Splits, and More

A corporate action is any activity a company takes that affects shareholders and results in a significant change to the company's stock. Our dedicated Corporate Actions Team is committed to making sure the changes that come with corporate actions are seamless for you and all of our users.


We process mandatory corporate actions, which include stock splits, mergers, and spinoffs, and accept orders to participate in voluntary corporate actions like tender offers. For mandatory corporate actions, we’ll make sure the necessary adjustments are made in a timely manner, according to the affected company’s wishes.

A voluntary corporate action allows shareholders to choose if they want to participate in the event, and the company can’t act without the shareholder’s response. Examples of voluntary corporate actions include tender offers, buyback offers, and rights offerings.

Tip

If you have specific questions about the terms of a corporate action, like why it’s happening, we encourage you to reach out the company’s Investor Relations department for details.

Keep in mind

We’ll temporarily prevent you from trading the affected stock while the Corporate Actions Team works to process these changes.

You can stay up to date with recent corporate actions by checking out our Corporate Actions Tracker–a curated list of the most relevant corporate actions on Robinhood.

Stock Splits

What Happens to the Company

A company performs a stock split to increase or decrease the number of shares it has in the market.

Forward Stock Split

What Happens to the Company

When a company decides to execute a forward stock split, the number of outstanding shares will increase, while the stock's price will decrease; and the overall market value of the position will remain the same.

What Happens to Your Shares

This means that you will see the number of shares you own in the company increase, though the value of each individual share will decrease proportionally.

Example

If you own 10 shares of XYZ valued at $10 each, and XYZ executes a 10 for 1 (10:1) stock split, you’ll now own 100 shares valued at $1 each.

Reverse Stock Split

What Happens to the Company

Similarly, when a corporation executes a reverse stock split, the number of shares in the market will decrease, while the market value for each of those individual shares will increase.

What Happens to Your Shares

This means that you’ll see the number of shares you own in the company decrease, though the value of each individual share will increase proportionally.

Remember, the overall value of the position always stays the same in a stock split.

Example

If you own 10 shares of XYZ valued at $10 each, and XYZ executes a 1 for 10 (1:10) reverse stock split, you will now own 1 share worth $100.

Mergers

What Happens to the Company

Sometimes a company will choose to acquire another company. The buying corporation may choose to perform a cash merger & liquidation, a stock merger, or a cash and stock merger.

Cash Merger & Liquidation

Imagine XYZ Co decides to buy out Y Corp:

Now that XYZ Co controls the shares of Y Corp, it can decide that investors who own shares of Y Corp will receive $10.00 for every 1 share of Y Corp they owned. Y Corp’s shareholders are paid their cash (cash merger), and Y Corp stock stops trading in the market (liquidation).

Stock Merger & Liquidation

Imagine XYZ Co decides to buy out Y Corp:

Now that XYZ Co controls the shares of Y Corp, it can decide that investors who own shares of Y Corp will receive 2 shares of XYZ Co for every 1 share of Y Corp they owned.

Y Corp shareholders now own XYZ Co shares (stock merger), and Y Corp stock stops trading in the market (liquidation).

Cash & Stock Merger

A cash and stock merger simply means that the buying company will give owners of the acquired company shares of the buying company and a cash payout.

Fractional Shares

After a stock split happens, there may be extra shares left over.

A fractional share is a share of equity that is less than one full share. Companies have a few options when dealing with fractional shares that result from a corporate action:

  • They can pay cash-in-lieu proportional to the value of the fractional shares you own.
  • They can pay nothing.
  • They can round up to the nearest whole share.
Example

You own 10 shares of XYZ, and XYZ undergoes a 1:3 reverse stock split.

You will technically now own 3.33 shares of XYZ.

We don’t support fractional shares, so you’ll experience one of the above-mentioned outcomes, depending on what the company decides to allocate.

Cash-in-Lieu

Cash-in-Lieu is a cash payment made to owners of fractional shares that result from corporate actions. The cash rate is predetermined by the company performing the corporate action, and can be found on the company’s corresponding SEC 8-K document.

You should expect cash-in-lieu payments to settle in your Robinhood account three to four weeks after the corporate action has been completed. Confirmation of this payment can be found in your monthly account statements.

Spinoff

Sometimes a company will choose to create a new, independent company under its umbrella. The original company may choose to issue shares of the new independent company to the original company’s shareholders.

Delisting

Delisting simply refers to a stock’s removal from an exchange. Oftentimes when we refer to a stock’s delisting, we mean that it’s been removed from a major exchange and now trades on the OTC markets.

Voluntary Corporate Actions

Participating in a Voluntary Corporate Action

The issuing company performing the corporate action decides the terms of the offer, and you’ll receive offer materials and instructions via email, or through traditional mail, if you choose. The materials will outline the terms of the event and provide important information such as the expiration date.

If you'd like to participate, simply reach out with the following information:

  • The stock symbol for the offer
  • The number of shares you’d like to participate with

A member of the Robinhood team will be happy to help you process your voluntary corporate action.

Tender Offers

A tender offer invites existing shareholders to "tender”–sell–their shares. Basically, a tender offer is a conditional offer for the company to buy back your shares of the stock. The company making the offer is willing to buy your stock at a predetermined price if you tender your shares.

Example

For example, Company XYZ has a current stock price of $10 per share. The company presents shareholders with the offer to tender their shares for $12.00 per share. You can choose if you want to sell your shares back for $12, or just hold on to them with the expectation they're worth more than $12 per share. You’re not obligated to take any action, which is why a tender offer is considered a voluntary corporate action.

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.

Example

For example, Company XYZ issues warrants to buy 10 shares of their stock at a $10 strike price and you own one of the warrants. Five years after you receive the warrant, Company XYZ’s stock is trading at $20 in the market. You could exercise your warrant and buy your ten shares at the $10 strike price instead of the $20 market price.

Rights Offerings

When a company plans to offer new shares of stock to the public, sometimes they’ll issue a rights offering. A rights offering gives existing shareholders an opportunity to purchase shares of the new stocks at a specific price before those shares are offered to the rest of the public.  Rights have an expiration date and are issued for a short time only.

Rights are usually issued in proportion to the number of shares you currently hold. For example, if you currently hold 100 shares in Company XYZ, you will likely be issued 100 rights. This could differ depending on the specific terms of the corporate action, of course. Participation in a rights offering is voluntary.

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