Corporate Actions - Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
ADR (American Depository Receipt):
Certificates that represent ownership of a given number of shares dealt separately from the underlying stock. They are issued by US banks and usually traded in US$. For example, British Airways, BG (British Gas) and Lastminute.com all trade in the United States as ADRs.
AGM:
A Company's Annual General Meeting is normally held 21 days after the Annual Report is published. Shareholders attend and can vote to re-appoint the directors, pass resolutions, and question the Company's management.
Allotment Letter:
A legal document sent to shareholders during a Rights Issue. It represents the unconditional right to buy new shares. Shares should be paid for in advance. Allotment letters can be traded as renounceable documents, where the seller signs over the rights to a buyer.
Annual Report and Accounts:
These set out the company's yearly financial performance. They comprise the Profit and Loss Account, Balance Sheet, Notes and a Statement of Cash Flow. All PLC companies are obliged to make these available to shareholders.
B
Bank of England:
Is the UK's central bank. It is used by all UK banks and decides on monetary policies and interest rates.
Bond:
A form of debt security issued by a Company or Government that earns interest for the investor. Bonds normally have a fixed life and are repaid at maturity after a set number of years. Also referred to as Loan Stock.
Bonus Issue:
A benefit distribution in which additional shares are issued to qualifying shareholders (at no cost) in proportion to their existing holdings, as a result of a Re-arrangement of a Company's capital structure. No new funds are raised for the company. Also known as a Capitalisation Issue.
Book Building Process:
Investors are asked to indicate, either on a firm or uncommitted basis, the best price that they will offer and the maximum number of shares that they will buy at particular times. This information will establish the most appropriate offer price for the issue.
Book Value:
The value of a company's assets as shown in the Annual Report (which may, or may not, reflect current valuations).
C
Call Payment:
A payment made for the Subscription for new securities, or in payment for sums outstanding to the issuer, in relation to existing Securities (commonly in the context of Rights Issues, Open Offers or partly paid securities).
Call option:
A contract giving the investor the right, but not the obligation, to buy shares at a fixed price (the Strike Price) within a certain time frame (up to the expiry date).
Capitalisation Issue:
A benefit distribution in which additional shares are issued to qualifying shareholders (at no cost) in proportion to their existing holdings, as a result of a re-arrangement of a company's capital structure. No new funds are raised for the company. Also known as a Bonus Issue.
Cash dividend:
A cash payment to all qualifying shareholders in proportion to their holdings, usually shown in pence per share held.
CDIs:
Crest Depository Interests are independent Securities, constituted under English Law, which may be held, transferred and settled within CREST. CDI holders will not be the legal owners of the shares to which they are entitled as a result of a Corporate Action. They will however, have an interest in the shares through their ownership of CDIs.
Consolidation:
A company proportionally increases the Nominal Value of each security whilst decreasing the number of units of the security in issue. For example, every 5 x 10p share could be consolidated into 1 x 50p share.
Conversion:
An optional or compulsory event whereby the holder of a security converts the security into some other security, at a ratio set by the company. This is applicable to convertible debt securities and convertible Preference shares. The event may be continuous or at intervals or by reference to a single date.
Convertible Bond:
A Bond that may be converted at the holder's option into a fixed number of ordinary shares. There is normally one conversation date a year. If the Bond has not been converted into Ordinary shares at maturity it will be redeemed for cash.
Crest:
CREST is the UK system for the paperless settlement of trades in securities and the holding of uncertified securities. It avoids the need for share certificates, which can delay trading and settlement.
CTV:
A Consolidated Tax Voucher is sent out at the end of each Tax year, and details the income that a client has received on their portfolio. CTVs should be kept for income tax records. Also referred to as 'Composite Tax Vouchers'.
Cum:
Latin for 'with'. Used to indicate that the buyer of a security is entitled to participate in the forthcoming event. So: 'Cum Dividend' or 'Cum Rights'.
D
Debenture:
A loan raised by a company, paying a fixed rate of Interest to investors, and secured against the company assets.
Default conditions:
When we notify clients of a Corporate Action, we will specify in our email if there is a choice of actions. If there is a choice to be made and we do not hear from the client for whatever reason, we will apply the default action, which will be specified in the email.
Dividends:
The income payable to shareholders, normally shown in pence per share. Dividends are optional and at the company's discretion. They may be distributed as cash, Scrip or Enhanced Scrip Dividends payable in two half-yearly instalments known as interim and final payments. Also referred to as 'Income Events'.
Drawing:
A company Redeems (buys back) specific Securities according to the terms of issue of the security. Not all the stock in issue is necessarily redeemed.
E
Enfranchisement:
A non-optional event where a voting restriction is removed from a Security.
Enhanced Scrip Dividend:
These are made available to persuade holders to take the cash Dividend in the form of shares. The holders can then sell the shares back to the company's broker, usually at a marginally better price than the market price. Any cash then received as a result will be paid as a Capital Payment, instead of income.
Ex:
The opposite of 'cum', literally 'without'. Used to indicate that the buyer is not entitled to participate in whatever forthcoming corporate actions are specified. Thus ex Dividend or ex Rights.
F
Final dividend:
The Dividend paid by a Company at the end of its financial year.
Fiscal year:
This period runs between 6 Apr and 5 Apr the following year; used for assessment of Income Tax and Capital Gains Tax.
G
Gearing:
When a company's debts are expressed as a percentage of its equity capital. A high gearing would signify debts are high in relation to equity capital. Also known as leverage.
Gilts:
Another term for Government Stocks or Government Securities - Bonds issued by the Government. Gilts due for redemption within five years are called 'Short Gilts'; and those of longer maturates 'Long Gilts'.
Gross:
The opposite of 'net'; i.e. before tax has been deducted.
H
I
Interest Payment:
A benefit distribution in which a cash payment is made to holders of certain types of debt security.
Interim dividends:
A Company's payment of Dividends to shareholders halfway through its financial year.
J
K
L
Lapse nil paid shares:
In a Rights Issue, when you decide not to take up the rights, the company will sell the rights to an agent and give you the value received less commission. This is called Lapsing.
Loan stock:
A Bond issued by a company which bears a fixed rate of Interest but which may not be secured against any assets.
M
Mergers:
A coming together of two or more organisations through mutual agreement. The companies join assets, liabilities and ongoing operations, etc. to form one entity.
N
Net:
The opposite of 'Gross' i.e. after the deduction of tax
Nil paid shares:
These are allocated during a Rights Issue. They give the holder the right to buy at a predetermined price some time in the future, usually at a discount to the market value.
Nominal Value:
The value ascribed to a share when it is first authorised and issued by a company. The nominal value bears no relationship to a share's market value.
O
Open offer:
These occur when the company wishes to raise extra finance. Shareholders are given the opportunity to purchase extra shares in proportion to their existing holdings. Unlike a Rights Issue, you cannot sell your entitlement in an Open Offer.
Ordinary Shares:
An Ordinary share gives the holder a share in the company. The holder of Ordinary shares becomes a part owner of the Company. Ordinary shares are the most common shares in issue and the basic trading counters of the stock market. Also referred to as 'Equities'.
P
Pari Passu:
Pari Passu is a term which tells the investor when their new issue shares (which have resulted from a Corporate Action) attain the same rights as the existing shares.
Pre-tax profits:
Usually Gross profits after deducting operating costs and Interest payments but before tax.
Preference shares:
Preference shares are usually redeemed after a fixed life, and, typically, pay a fixed Dividend each year. In the event of a company's collapse or break-up, preference shareholders rank ahead of the Ordinary shareholders for repayment.
Proxy:
A form, which allows shareholders to vote without attending the meeting. The shareholder can nominate an individual or the Chairman to vote on their behalf.
Q
R
Record date:
The date when the Registrar reviews which shareholders are entitled to benefits, e.g. an Open Offer.
Redenomination:
Whereby the Company Redenominates its share capital into another currency. For example existing IEP0.25 become EURO0.32
Registrars:
The Registrar maintains and updates the company registers held by them.
Renominalise:
The stock Par Value is Renominalised. For example GBP0.10 Shares go to GBP0.25 Shares.
Rights Issue:
An issue of new shares by a Company in the market to raise funds. Current shareholders will be allotted rights (Nil Paid shares) in accordance with the ratio set by the company. Thus, an 11 for 10 rights issue gives the existing holder the chance to buy eleven new shares for every ten held. The price of the new shares is set at a price between the Nominal Value and the market value of the existing shares. It will generally be at a lower price than the existing market price so the issue is attractive to shareholders. The right to subscribe allows shareholders to retain their percentage holding in the company. The Nil Paid shares trade for a certain period of time, allowing shareholders the opportunity to sell their entitlement in the market rather than paying the Call Price.
S
Securities:
The general name given to stocks and shares issued by a Company to its investors.
Scheme of Arrangement:
Stock, cash or a combination of both may be distributed or replace some or all of one (or more) lines of security.
Scrip Dividend:
A mandatory benefit distribution whereby shareholders may receive Dividends as shares.
Subscription:
The exercise of a right to subscribe for Securities. If not exercised by a certain date, the right Lapses.
Subdivision:
The opposite of Consolidation. For example, the Ordinary share nominal value is 50p per share and this is subdivided into 10p per share. The shareholder will then hold 5 x 10p shares for every 1 x 50p shares previously held. Subdividing will have the effect of increasing the number of shares in the market; decreasing the Nominal Value and decreasing the market price per share. The actual value of shares held will still be an equal proportion to the market total.
T
Takeover:
A bidding company seeks to obtain a controlling interest (more than 50% of the shares) in the target company.
Tender offer:
An Offer where the company offers to buy back shares. Shareholders are asked to stipulate the price that they are willing to sell their shares for or they can elect for the Strike Price (a price not known until after the Tender Offer has occurred). Occasionally, the Company may announce the price at which they will purchase the shares at, but only for a certain percentage of a client's individual holding.
U
V
W
Warrant:
A Company may issue Warrants, which entitle the holder to a right to take up Ordinary shares at a set price within a defined time period. The company does not pay Dividends on Warrants. Warrants can be traded on the market.
X
Y
Z
