Corporate Actions & Reorganizations Flashcards

Which of the following best describes a mandatory corporate action?

Answer: A stock split that automatically affects all shareholders

A mandatory corporate action such as a stock split is automatically applied to all shareholders without requiring any election or decision.

What is the 'record date' in the context of a corporate action?

Answer: The date by which an investor must own shares to be entitled to the benefit

The record date is the cutoff date established by the company to determine which shareholders are entitled to receive a dividend or corporate action benefit.

In a 3-for-1 stock split, an investor holding 150 shares at $90 each would have after the split:

Answer: 450 shares at $30 each

In a 3-for-1 split, the number of shares triples and the price per share is divided by 3, so 150 × 3 = 450 shares at $90 ÷ 3 = $30 each.

What is the 'ex-dividend date'?

Answer: The date after which buyers of the stock will not receive the declared dividend

The ex-dividend date is the first date on which a stock trades without the right to receive the upcoming dividend; buyers on or after this date do not receive the dividend.

A reverse stock split is most likely used by a company to:

Answer: Raise the share price to meet exchange listing requirements

A reverse stock split consolidates shares into fewer, higher-priced shares, which is commonly done to meet minimum share price requirements for continued exchange listing.

Which of the following corporate actions is considered a 'voluntary' action?

Answer: Rights offering

A rights offering is voluntary because existing shareholders must choose whether to exercise their rights, let them expire, or sell them; participation is not automatic.

What is a 'spin-off' in the context of corporate reorganizations?

Answer: A company distributing shares of a subsidiary to its existing shareholders

A spin-off occurs when a company creates an independent company by distributing shares of a newly formed or existing subsidiary to its current shareholders as a dividend.