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 Corporate Actions team is committed to making sure the changes that come with corporate actions are seamless for our customers.
We process mandatory corporate actions, including stock splits, mergers, and spinoffs. For mandatory corporate actions, we’ll make sure the necessary adjustments are made in a timely manner, according to the affected company’s wishes.
We also accept orders to participate in voluntary corporate actions like tender offers or buy-backs and rights offerings. This allows shareholders to choose to participate or not in the event. The company can’t act without the shareholder’s response.
If you have specific questions about the terms of a corporate action, like why it’s happening, reach out to the company’s Investor Relations.
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, which is a curated list of the most relevant corporate actions on Robinhood.
A company performs a stock split to increase or decrease the number of shares it has in the market.
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.
The number of shares you own in the company will increase, while the value of each individual share will decrease proportionally.
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.
The number of shares you own in the company will decrease, while the value of each individual share will increase proportionally.
Remember, the overall value of the position always stays the same in a stock split.
Sometimes a company will choose to acquire another company. The buying corporation may choose to perform a cash merger and liquidation, a stock merger, or a cash and stock merger.
Let’s say XYZ buys out Y Corp:
Let’s say XYZ buys out Y Corp:
A cash and stock merger simply means the buying company gives the shareholders of the acquired company shares of the buying company and a cash payout.
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.
After a stock split, extra shares may be left over, which are known as fractional shares.
A fractional share is a share of equity that is less than the value of 1 full share. Companies have a few options when dealing with fractional shares that result from a corporate action, such as:
You own 10 shares of XYZ, and XYZ undergoes a 1:3 reverse stock split. You’ll now own 3.33 shares of XYZ.
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 can expect cash-in-lieu payments to settle in your Robinhood brokerage account about 3-4 weeks after the corporate action has been completed. You’ll find confirmation of this payment in your monthly brokerage account statements.
Robinhood typically issues fractional shares instead of paying cash-in-lieu.
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.
The issuing company performing the corporate action decides the terms of the offer. As a shareholder, you’ll get the offer materials and instructions through email or traditional mail. The materials will outline the terms of the event and provide important information, such as the expiration date.
If you'd like to participate, you can make your election directly through the email (or traditional mail) with the terms. Or contact us with the following information and our team can help process your election:
Note that instructions must be submitted prior to the broker’s expiration date, which is provided in the event emails.
A tender offer invites existing shareholders to tender or 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 them.
Let’s say XYZ has a current stock price of $10 per share. The company presents shareholders with the offer to tender their shares for $12 per share. You can choose 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.
To participate, follow the directions in the email and make your election through the voluntary election site.
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.
For example, XYZ issues warrants to buy 10 shares of their stock at a $10 strike price and you own one of the warrants. Then 5 years after you receive the warrant, XYZ stock is trading at $20 in the market. You could exercise your warrant and buy your 10 shares at the $10 strike price instead of the $20 market price.
If you'd like to participate, ap with the following information and our team will help process your warrant:
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.
Let’s say you currently hold 100 shares in XYZ, you’ll likely be issued 100 rights. This can differ depending on the specific terms of the corporate action. Participation in a rights offering is voluntary.
If you'd like to participate, contact us with the following information and our team will help process your offer: