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How do you handle corporate events?
A corporate action is an event initiated by a public company that affects the shares/equities issued by the company. For example:
Dividend - A portion of corporate profits that are allocated to shareholders. When a dividend is paid, the value of the share drops.
Spinoff - An independent company is created through the distribution of new shares of the parent company. The parent company’s shares will lose value following a spinoff, and shareholders receive equivalent shares of the new company as compensation.
Rights Issue - Existing shareholders are offered a right to purchase additional shares of the company at a discount. This usually lowers the price of the company’s share.
Stock Split - Increasing the number of outstanding shares by dividing each share, while the market cap remains the same. Share value decreases, as number of shares increases.
Reverse Stock Split – Reducing the number of outstanding shares by consolidating existing shares, while the market cap remains the same. The share value increases as the number of shares decreases.
As you do not own the physical share/equity when trading CFDs, you neither acquire voting rights, nor any rights under a rights issue or similar event such as stock split, etc.
Therefore, in order to ensure that there is no material impact to your open position(s), following a corporate event, Plus500 will automatically adjust your account. For example, in the case of a dividend, Plus500 may add to/subtract from your balance the amount you would have incurred as an additional loss/profit (depending on your position’s direction). In the case of a Stock Split or a Reverse Stock Split, the number of shares and price will be updated, as necessary. This is referred to as an ‘Adjustment’.
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