What are corporate actions?

Corporate actions are a specific type of events initiated by an issuer that usually: i) have a predetermined arithmetical impact in the price of one or more of its securities; ii) require the approval from the issuer's Board of Directors and Shareholders; and iii) are not directly related to the company's day-to-day business decisions.

Corporate actions can be categorized in two types:

• Distributions:
• Dividends;
• Rights issues;
• Bonus issue;
• Bond interest payment;
• Bond redemption.

• Reorganizations:
• Mergers;
• Absorptions;
• Acquisitions;
• Spin-offs;
• Stocks splits;
• Reverse stock splits;
• Issuance of new shares;
• Cancellation of shares;
• Delistings.

Example

Paragon ID (a french provider of identification solutions with shares listed in Euronext Paris) implemented a 35:1 reverse stock split, as approved by its shareholders at an Extraordinary General Meeting on 27/Feb/2018, to become effective on 12/Apr/2018, with the following terms:

• Before the reverse stock split (on 11/Apr/2018):
• Number of shares outstanding: 58.286.819
• Nominal share value: 1,00 €
• Share price: 1,17 €
• Market capitalization: 68.195.578 € (1,17 € x 58.286.819)
• ISIN code: FR0011980077

• After the reverse stock split (on 12/Apr/2018):
• Number of shares outstanding: 1.665.337 (58.286.819 divided by 35)
• Nominal share value: 35,00 € (1,00 € multiplied by 35)
• Share price: 40,95 € (1,17 € multiplied by 35)
• Market capitalization: 68.195.550 € (40,95 € x 1.665.337)
• ISIN code: FR0013318813

Note that the values for market capitalization before and after the reverse stock split are practically the same. Indeed, if there was no need for rounding, they would be exactly the same, as (in principle) this kind of operation does not affect the value of a company, being strictly arithmetical. The recorded difference incurs from the fact that 58.286.819 is not divisible by 35.