What is a corporate action?

Corporations often take actions that affect their shareholders. Unlike many other advisers, we believe that you should be empowered to vote in corporate actions of the companies in which you invest because stockholder activism is a crucial part of overall SRI investing. The following list defines each type of corporate activity:

Proxy

A proxy is a written document that allows a shareholder to vote without attending a company meeting. If you receive a proxy statement, you will be notified by email. The email will provide instructions for choosing the following options:

  • vote "Yes" on the issue,
  • vote "No" on the issue,
  • vote for a specific board member(s), or
  • abstain from all voting. 

Cash Dividend

A cash dividend occurs when a corporation decides to distribute some of its earnings or profits to shareholders in the form of a cash payment. If you own securities in a corporation that declares a cash dividend, you will not receive a notice in advance from us.

Dividends of less than a $1 are returned to your Swell cash account; dividends of greater than $1 are automatically reinvested for you. Fractional shares will be paid.

Stock Dividend

A stock dividend occurs when a corporation pays a dividend in security rather than cash. If you own security in a corporation that declares a stock dividend, you will be notified by email. The day the dividend is paid, the stock dividend will be added to your total share value.

Optional Dividend

With an optional dividend, the corporation gives its shareholders the option of receiving the payment in cash, security, or some combination of both.

If you receive an optional dividend for a security, you will not receive advance notice. The dividend will be paid in the following ways:

  • Dividends of less than $1 are returned to your Swell cash account; dividends of greater than $1 are automatically reinvested for you. Fractional shares will be paid. 
  • If you receive an optional dividend for a security, you will be notified by email and you will be asked to indicate how you would like to receive your dividend.

Stock Split

When a stock splits, a corporation increases its outstanding shares. As a result, the share prices usually decreases. If you own security in a corporation that authorizes a split, you will be notified by email. The number of shares you own will be adjusted on the date the split goes into effect.

Reverse Stock Split

When a reverse stock split occurs, a corporation is decreasing its outstanding shares. As a result, the price per share usually increases. If you own security in a corporation that authorizes a reverse split, you will be notified via email. The number of shares you own will be adjusted on the date the split takes effect.

Merger/Restructure

A merger occurs when two or more companies combine to form one company. A restructuring occurs when a company internally reorganizes, possibly dividing into separate companies. If a merger or corporate restructuring applies to a security you own, you will be notified by email. If a ticker symbol changes, we will automatically update your holdings. Similarly, if any shares are exchanged, we will automatically make the adjustment.

Rights Offering

A rights offering occurs when a publicly traded company gives its current stockholders the right to maintain proportionate ownership before offering new shares to the public. For example, assume you own 2% of a company's outstanding shares. The company decides to issue new shares and issues a rights offering. You are given the right to purchase 2% of the new shares before they are offered to the general public. 

If you are offered rights, you will be notified by email. The email will provide instructions for choosing the following options:

  • exercise the rights
  • let the rights expire
  • trade the rights if they are transferable
  • sell the rights back to the company if the option is provided, or
  • select a combination of available options.

If you choose to exercise the rights, you must have the cash available in your cash account to buy the shares.

Tender Offer

A tender offer is an offer to buy shares of one security in exchange for shares of another security, cash, or a combination of both. If you receive a tender offer, you will be notified by email. The email will provide instructions for choosing the following options:

  • accept the offer,
  • accept part of the offer, or 
  • decline the offer. 

Class Action

A class action is a lawsuit filed against a company on behalf of its shareholders. In nearly all classes, your legal right to seek a remedy on your own will be taken away unless you take action and opt-out of the class action. 

If a class action is filed, you will be notified by email. If you are uncertain about whether you should be part of the class action or opt-out of it, please seek legal advice. 

If a class action covers wrongdoing that causes the price of a security to fall, the class action notice will state that only stockholders over a specified period of time may seek claims. For example, the notice may say, "Anyone owning stock in this company from July 1, 1999 to August 15, 1999 may be entitled to file a claim."

 

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