Lesson 6.1: Understanding Corporate Actions
Corporate actions are decisions made by a company’s board of directors that affect shareholders. They can alter stock prices, dividend income, and ownership structure.
Types of corporate actions:
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Mandatory: All shareholders are affected (e.g., dividend payouts, stock splits).
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Voluntary: Shareholders choose whether to participate (e.g., rights issues, buybacks).
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Mandatory with Choice: Company offers options (e.g., dividend either as cash or additional shares).
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Example (NSE):
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When Safaricom declares dividends, all shareholders on the record date automatically receive them (mandatory).
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When Centum offers a rights issue, investors can choose to buy additional shares or not (voluntary).
Key takeaway: Corporate actions are a company’s way of redistributing profits, raising capital, or restructuring ownership.