Corporate actions/capital adjustments Flashcards
Bond issuer sets aside a certain amount each year to buy back a certain number of bonds which are deemed callable, what is this?
Sinking fund
Entitlement to dividend - cum- and ex- dividend date?
Cum-div period: buyer of secuirty is entitled to receive next divi payment
Ex-div period: Entitlement to next divi payment remains with the seller.
What might a sinking fund be combined with?
A bond issue that is callable
What is a callable bond?
When an issuer has the right, at a specified points in bond’s life, to redeem some or all of bonds at pre-agreed amount
often as par value
Record date
Date when a company inspects register of members in order to establish which SHs will be sent the dividend
Special ex-date trade
Trade where share is bought/sold without he divi that takes place in the cum-div period.
Benefit of the special ex-date trade and how long can this be?
Usually for tax considerations
Permitted for 10 days before the ex-div date
Special cum-div trade?
Share is bought/sold with dividend that takes place in the ex-div period
How long is special cum-div trade allowed?
Up to the day before the div payment date
What is a rights issue?
Follow on issue of shares that gives exisitng shareholders right to subscribe to more shares in proportion to existing holding (pre-emptive rights)
Positive of rights issue?
Mitigates risk of diluting ownership
Share typically offered at a discount to the current mkt price.
Such issues are generally underwritten
SHs waiving pre-emption rights - how can this happen?
Through special resolution at a general meeting of Uk-listed companies - need 75% or more approval
In these situations, even so, best practice to limit such issuance to 5% in a single year unless resolution states otherwise.
