A cash dividend is the portion of profit a company chooses to pay out to its shareholders – usually expressed as a percentage. To be eligible, you would need to hold your position into the market open of the ex-date.
A bonus issue or stock dividend is when shareholders are given ‘free’ shares. The amount of new shares the shareholder would receive is based on the terms of the bonus issue, which is expressed as a ratio – for example, 1 bonus share per 10 shares held. Bonus issues may increase the number of shares you hold but the price of the shares would fall proportionally to the ratio, having no overall affect on the monetary value of your holdings.
If you have an open position on a company that offers a bonus issue or stock dividend, we’ll open a new separate position at the level of zero on the ex-bonus issue date. Your original position will be unaffected.
Say Apple announces a 1 for 10 bonus issue or stock dividend, and you are holding 100 shares. If you hold this position through the ex-date, you would receive a new position of 10 new shares at a level of 0 in Apple and you would continue holding your initial position of 100 shares. Equally, the share price would also drop by 1/10 or 10%
What is a rights issue?
A rights issue is when a company offers its existing shareholders the chance to buy additional shares – usually at a discounted price – to raise capital
How does a rights issue work?
If you would like to participate in a rights issue and buy shares, you would first have to qualify by holding shares in the company through the ex-date. For qualifying shareholders, we’ll create a new position on your account called ‘(company name) – rights issue’ and our corporate actions team will send an email notification containing the terms of the rights issue, important dates and your available options.
For non-European shares, the size of the new rights issue position will reflect the terms of the issue which is usually expressed as a ratio of shares you hold.
For European-listed stocks, the new position will be booked on to your account on a 'one right for one share' basis, then adjusted at a later stage if you participate in the rights issue.
You have three options for long positions on spread bet, CFD, share dealing and ISA accounts:
- Elect to take up the rights (agree to purchase the shares) by replying to the relevant email from our corporate actions team before the relevant IG deadline date (stated in the email). In this case you need to ensure your account is sufficiently funded to pay for the new shares. Be sure to refer to the email from our corporate actions team for all of the required information. If rights were successfully taken up, the new shares will be booked onto your account on or around the pay date (for spread bet and CFD accounts) or a few days after (for share dealing and ISA accounts)
- Do nothing and let the rights lapse. The rights issue position would eventually fall away and you would forfeit the opportunity to purchase the shares. You do not need to reply to the email from our corporate actions team if this is what you wish to do
- Trade out (sell) the rights. Depending on the size of the rights issue, you may be able to do this directly on the trading platform. If this is not possible, you will need to call our helpdesk during trading hours and place the trade through one of our dealers
For short positions on a spread bet or CFD account, you’ll have two options:
- Buy the rights back. You would need to call our help desk during trading hours and place the trade through one of our dealers
- Leave the new position to expire. If you leave the position you’ll be at risk of being ‘taken up against’ – meaning the rights will automatically be taken up, and you will short the shares at the subscription price
Investors need to take action if they wish to participate in the rights issue or open offer. If you hold a position in a stock on the close of business the day before ex-date, when a company is having a rights issue or open offer, then we’ll book the new rights or offer on your account on the ex-date.
You’ll receive an email on ex-date clarifying your options, or you can find this information plus a full event breakdown by logging into MyIG and going to the corporate actions portal. Please don’t try to elect before the ex-date or email the corporate actions department – we’ll only accept elections via MyIG from the ex-date onwards.
If you hold rights or an open offer on multiple accounts, you’ll need to elect for each account separately in MyIG to take up the offer, and we’ll progress it from there.
We’ll email you a confirmation for each election that we receive from you. As long as we receive your election preferences ahead of the IG deadline date, then your election will be processed.
The only thing left to do once you’ve elected in MyIG, is to make sure your account is funded accordingly to cover your new position by the IG deadline date, which will be visible in MyIG.
How do I elect on a Rights Issue or Open Offer via MyIG? (for Share Dealing and ISA clients only)
The election process for corporate action events is changing. You’ll no longer need to contact the team and can manage your elections entirely through MyIG.
This guide will show you how to find the new corporate actions area and take you through all the possible actions available.
This is the MyIG dashboard.
Select the ‘Live accounts’ tab in the top left-hand corner.
Then select the account that’s been affected by the corporate action, from the drop-down menu on the left-hand side. You’ll receive this information in an email from IG on, or around, ex-date.
Once the account is selected, click on the corporate actions option on the main left-hand side menu.
Here you’ll see the corporate actions affecting your portfolio. We show the stock name, live status and the IG deadline, which is the date by which you’ll need to elect, trade out of, or fund your account.
Click on the event to see your available actions, plus key information such as subscription prices, ratios and key dates/times.
You’ll have a range of options depending on the event, and if the rights are tradable or not.
Select the action you wish to take and click continue.
What is a stock split or consolidation / reverse stock split?
A stock split occurs when a listed company splits its outstanding shares into more shares, often to make the shares more affordable for retail investors and therefore attract more investment. The company’s market cap and the overall value of each shareholder’s investment stay the same during a stock split, but the price of each share is reduced as the number of shares increases.
A consolidation or reverse stock split is when a company wants to lower the number of outstanding shares and increase its share price. Some stock exchanges have a minimum share value, so a company may employ a reverse stock split to avoid being delisted from said exchange. This can also take place to make a company appear more valuable to potential investors, as a higher-value share could improve sentiment.
How does a stock split or consolidation work?
When splitting stocks, a company will first determine a split ratio – this is the ratio by which the number of outstanding shares and current share price will adjust. For example, if the stock split ratio is 2:1, the number of shares will double, and the share price will be halved.
Stock split example:
You own ten shares in a company, each valued at £100 prior to a stock split of 2:1, giving you a total of £1000 worth of shares. After the split, you own 20 shares, each worth £50 (£100 ÷ 2). Your total investment values stay the same at £1000.
A consolidation or reverse stock split would have the opposite effect, with the share price doubling and number of shares halving – also without affecting the total value of your initial investment.
How does a stock split or consolidation affect my spread bet or CFD account?
The standard process is for us to close your original position at your initial trade opening level (ensuring no profit or loss is realised) and open a new trade on your behalf reflecting the ratio of the split/consolidation.
Any attached stops or limits will be adjusted according to the terms of the split/consolidation to ensure your monetary risk remains the same.
How does a stock split or consolidation affect my share dealing or ISA account?
The standard process is for us to close your original position (date of stock split) at your initial purchase price of the shares (ensuring no profit or loss is realized) and open a new trade on your behalf with the number of shares in accordance to the terms of the split/consolidation and at a book cost of zero. If you need to change your book cost, you can find out more information here(hyperlink).
This process may affect your profit/loss figures as the number of your shares will increase (for stock splits) or decrease (for consolidations) in proportion to the split ratio but the book cost will reflect as zero. To correct this, you will need to manually adjust your book cost
A spin-off is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company. This is usually carried out when spin-off companies are expected to be worth more as independent entities rather than as parts of a larger entity.
Spread bet and CFD accounts:
On spin-off ex-date, we’ll create a position on the new company at a level of zero in accordance with the terms of the spinoff. Once tradeable, you can then choose whether to trade the new company or not.
If you have a guaranteed stop on your spread bet or CFD position, we’ll amend it in accordance with the terms of the offer. A separate position will then be posted on your account in the name of the spun-off company, with a stop attached to ensure your total monetary risk remains the same.
Share dealing and ISA accounts:
On, or a few days, after distribution date – when shares of the new company are issued – we’ll create a position on the new company at a level of zero in accordance with the terms of the spinoff. You can then choose whether to trade the new company or not. Please note that it can take several days after pay date for us to receive the shares, which can cause a delay in allocation.
A takeover bid is a corporate action in which a company (the acquirer) makes an offer to purchase another company (the target) usually to provide synergy, tax benefits or diversification.
The affect that a takeover will have on an existing position will vary, depending on whether the acquiring company offers cash, stock, or a combination of both for the target company.
Your position will be closed out when the cash is received and adjusted for interest, depending on the contract of the trade.
Your original position will be closed, and a new position will be opened to reflect the terms of the takeover, based on the previous night’s closing price. Any stops or limits will be adjusted accordingly.
Cash and stock takeovers:
The original position will be closed, and a new position will be opened to reflect the terms of the takeover based on the previous night’s closing price and the cash offer, and adjusted for interest depending on the contract of the bet. Any attached stops or limits will be adjusted.
Why would a stock delist?
The main reasons for delisting include violating regulations and failing to meet minimum financial standards such as the ability to maintain a minimum share price, financial ratio's, and sales levels. Delisting can also be a voluntarily decision by the company.
When a company does not meet listing requirements, the listing exchange issues a warning of noncompliance. If noncompliance continues, the exchange is required to delist the company's stock.
Usually, the company would issue a press release through the investor relations section of their website to notify shareholders. After a stock has delisted, our corporate actions and risk departments would review the status of the stock and make any account adjustments if required. Each account type has different processes as below:
The most common reason a stock would suspend trading is if incorrect financial information is released. If a stock is suspended, we would have to wait for the stock to become tradeable again – which is outside of IG’s control.
For spread bet and CFD accounts, our corporate actions and risk department may need to increase margin requirements depending on the status of the stock.
IG does offer these services