Types of Corporate Events Every Investor Should Know | R Blog RU



The share price is influenced not only by economic, political or geopolitical events, but also by corporate ones. What corporate events and which of them will be of interest to investors?

It should be noted that some events from the list below may have a slight effect on the stock price, while others, on the contrary, may provoke a sharp surge in the price movement.

The main corporate events include:

  1. Publication of financial statements
  2. Meeting of the board of directors
  3. Cutoff date
  4. Payment of dividends
  5. Split of shares (split)
  6. Consolidation (reverse split)
  7. Additional issue
  8. Merger of companies

Now let’s take a closer look at these events.

Publication of financial statements

Companies publish their financial reports for the previous reporting period. The reports are published in the morning before the opening of the trading session or in the evening after the close of trading. This is done to minimize price spikes.

After the publication of the reports, investors and traders have time to prepare for trading and decide on further actions. The opening of a trading session after the publication of reports, as a rule, occurs with a price gap (gap). The periods are divided into the following:

  • Quarterly report
  • Half-year report
  • Annual report

The company’s financial performance reports affect the share in direct proportion to the earnings it earns. With positive data, the share price starts to grow, with negative data, the price decreases. But that’s in theory. In practice, the opposite can also happen, and the reason for this is that the company can overestimate or underestimate its financial indicators. This is done for different purposes, one of them is attracting investors.

Meeting of the board of directors

Meeting of the board of directors also has a strong impact on stocks, as well as financial statements. The meeting decides on the cut-off date and payment of dividends, as well as the amount of payments. Issues of merger or splitting of shares are considered, and the company and its further fate are discussed.

The date of the meeting and the agenda of the boards of directors are announced no later than three days before the meeting, and the results of the meeting are published no later than three days after its end.

Cutoff date

Cutoff or dividend cut – this is the last date on which the investor must own shares in order to receive dividends (closing the register of shareholders). After the cut-off date, the final list of shareholders is formed who will participate in the distribution of dividends.

Sometimes speculators go for a trick and buy shares a few days before the cutoff to receive a dividend payment, the terms of holding the securities in this case do not matter and do not affect the payment. The payment of dividends after the cut-off usually occurs within a month.

Payment of dividends

On this date, the due payments are transferred to the account of the trader or investor. The amount depends on the decision made by the board of directors and is calculated based on the company’s financial indicators. Dividends can pay not only in case of positive indicators, but sometimes even if the company incurred losses.

Split shares

Split shares is the splitting of one share into several parts. The company’s capitalization remains at the same level, but the number of shares is increasing. This is done to reduce the value of one share. The cheaper the shares, the more private investors will be able to buy them. As a result, the liquidity on the stock exchange and the price attractiveness of shares for investors increase. The upcoming split speaks for the positive financial performance of the company.

Split procedure:

  • The split recommendation is submitted to the board of directors.
  • The split decision is approved at the shareholders’ meeting by voting and approved by a majority of votes.
  • The Board of Directors decides on the issue of additional shares.
  • The necessary documents are registered.
  • The required number of securities is being issued.
  • Changes are made to the company’s charter on the number of shares and their value.

The split does not affect the profit of the trader or investor, for this reason, no special trading strategies have been developed for such events. However, some traders buy stocks of companies after the split in the hope of rapid gains.

The decision on the upcoming share split can be found on the company’s website and from open sources on the Internet. If you are already a shareholder, the company or broker will notify you of the split.

Consolidation

Consolidation or reverse split Is the merger of several shares of one company into one. An uncommon occurrence in the stock market that suggests that a company is not doing well.

Another option for a reverse split is the merger of several companies or the acquisition of smaller companies by large companies and averaging the value of common shares. A reverse split lowers investor confidence.

Additional issue

Additional issue securities – this is the issue of shares in circulation in excess of the existing ones. In this case, the stakes of the shareholders who own the shares are “diluted”.

The main purpose of the additional issue is to raise additional funds for the development of the company or to pay off existing debts.

The main results of the additional issue:

  • Attracting new investors by increasing the number of shares in circulation.
  • Change in the authorized capital of the company.
  • Downward change in earnings per share.
  • Changing the influence of shareholders on the management of the company. If the investor owns 51% of the original number of shares, then the additional issue will reduce this figure, depriving the investor of the advantages.

The additional issue indicates that the company is in financial trouble. However, there are exceptions – a company may issue an additional shareholding to accelerate development or implement new projects.

Merger of companies

Merger of companies Is a combination of several companies and all the assets on their balance sheet. After the merger procedure, a new corporation or company appears on the market, which is the legal successor of the merged companies.

The purpose of the merge:

  • Strengthening competitiveness.
  • Increase in the quality of the manufactured product.
  • Diversification of production and risks.
  • Increased creditworthiness.
  • Growth in the value of shares and the company.
  • Innovation and increase in the range of products.

After the merger procedure, a new corporation or company appears on the market, which is the legal successor of the merged companies. As a result, the market can receive a high quality product or service or innovative technologies.

Conclusion

It is difficult to keep track of all corporate events when choosing companies for investment, but you can identify for yourself some of the more significant events and focus on them. It often happens that before a cut-off or dividend payment, the share price may rise or, on the contrary, fall. The investor can track the payment schedule and make investment decisions for himself.

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