Understand corporate actions & when to respond
Voluntary
Voluntary corporate action events give eligible shareholders the opportunity to choose a particular outcome.
Since participation is optional, Vanguard will typically communicate the offer details to you and ask you to respond on vanguard.com.
Mandatory
Mandatory corporate action events don’t offer eligible shareholders a choice in the outcome.
Since they aren’t contingent on a response, we typically don’t communicate details on these events, and the changes are automatically reflected in your account.
Common voluntary corporate action events
Some offers require response online or over the phone to apply your election decision to your investments. Here are some examples of common voluntary corporate actions:
Equity tender
An offer to buy all or some of the shareholder’s stock positions. The offer price may be payable in cash, stock, or a combination of both.
Bond tender
An offer to buy back a bond. The offer may have a set price that’s determined by the company or based on a specific reference yield calculation.
Exchange offer
A form of tender offer that involves exchanging currently owned shares for shares of a new security instead of cash.
Rights offer
An offer that allows the shareholder to purchase shares of the company at a subscription price within a fixed period (usually 2 to 4 weeks). The subscription price is usually below the current market price of the security.
Rights can be transferable (traded on the public market) or nontransferable (not traded).
Consent
A consent asks existing shareholders to approve or agree to proposed amendments or changes to the security. An incentive payment is usually offered for the agreement.
How to respond to a voluntary corporate action
To participate in or review the terms of the offer, log in to your Vanguard account, choose My Accounts, and select Balances & holdings. To read more about the offer, select “corp actions” below your account number.
Response submission policy
Response deadline
The last day Vanguard can guarantee your response to an offer. Vanguard's response deadline may be sooner than the company's deadline. Anything submitted after Vanguard's response deadline is on a best-efforts basis.
Critical deadline
The company’s deadline to participate in the corporate action event.
What are warrants and how do I exercise them?
Warrants give the holder the right to purchase a certain number of shares at a set price during an extended period. Warrants can usually be transferred, traded, or exercised by the holder.
Note: Warrants can trade while they still have value in the market or until they expire. If you don’t take any action before their expiration date, they’ll automatically be redeemed for little to no value.
How to exercise them:
- Warrant exercises will be available online through our Voluntary Corporate Actions portal one month prior to expiration. If you’d like to exercise them earlier, you can give us a call.
- Not all warrants can be exercised. You can find details about their features in the company's prospectus.
Abandonment of securities
You can elect to abandon one or multiple securities anytime by removing them from your account. By doing so, you permanently surrender and relinquish all rights and title in the abandoned securities.
If you wish to abandon one or multiple securities, log in to your Vanguard account, choose Forms from the top header, select the Search using title or keyword tab, and key in “Abandonment Request Form.”
Common mandatory corporate action events
Some offers may also require you to respond either online or over the phone to apply your election decision to your investments. Here are some examples of some common mandatory corporate actions:
Spin-offs
The parent company can split and create a new, independent company. When a company spins off shares, you retain your position in the parent company.
Forward stock split
An increase in the number of a company’s outstanding shares, often initiated to make shares affordable to more investors.
A forward split won’t result in a monetary gain or loss—the stock price per share will decrease, but your overall stake in the company will remain the same.
Example: You own 10 million shares of ABC company, selling at $9 per share, and the company declares a 3-for-1 split. You now have 30 million shares of ABC company, selling at $3 per share.
Reverse stock split
A decrease in the number of a company’s outstanding shares, often initiated to maintain the company’s listing on the exchange.
A reverse split won’t result in a monetary gain or loss—the stock price per share will increase, but your overall stake in the company will remain the same.
Example: You own 10 million shares of ABC company, selling at $9 per share, and the company declares a 1-for-2 split. You now have 5 million shares of ABC company, selling at $18 per share.
SPACs
A special purpose acquisition company (SPAC) is formed to raise money through an IPO (initial public offering) to buy or merge into another company. A SPAC has 2 years to complete the acquisition or return the funds to its shareholders.
For more information, visit SPACs: Risks to keep in mind.
Liquidations
Liquidations generally occur as a final payment at the end of a business life cycle: Typically, the shares will stop trading in the market, the security will be removed from the shareholder's account, and a final payment of cash and/or securities will be distributed to shareholders.
Common types of liquidations are ADR (American Depositary Receipt) terminations, ETF (exchange-traded fund) liquidations, and bankruptcy distributions.
CVRs
Contingent value rights (CVRs) are given to shareholders, usually during mergers, to receive future cash distributions or additional shares.
These distributions are contingent on the company meeting certain predetermined milestones. If the company doesn’t meet the milestones, the CVR will expire and be worth nothing.
You can find more information on these milestones on the company's investor relations page.
CVRs are typically nontransferable, meaning they can’t be sold or abandoned.
Mergers and acquisitions
During a merger, companies will negotiate to form a new company; in contrast, an acquisition will allow the acquiring company to absorb the assets of the other company.
Shareholders of a company involved in a merger or acquisition may receive a cash value for their position, new shares, or a combination of cash and shares after the company finalizes the event.
Name/Symbol Change
A ticker symbol may change when the company changes its name because of a corporate action such as a merger or rebranding.
Example: AOL Time Warner dropped the AOL and simply became Time Warner. The ticker symbol changed from AOL to TWX.
Dividends
Payments of income from companies in which you own stock shares.
If you own stocks through mutual funds or ETFs (exchange-traded funds), the company will pay the dividend to the fund, and it will then pass on to you through a fund dividend.
For more information about dividends, please visit these pages:
Special due bill processing
Tracks who’s due a pending payment when a stock is bought or sold after the record date of a distribution. Due bills are typically used for special dividend payments, stock splits, spin-offs, and sometimes during the issuing of rights and warrants.
When an event carries a due bill, the ex-dividend date of the distribution falls after the record date. The due bill ensures that shareholders are paid based on the ex-dividend date even if the stock was traded after the record date.
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