Corporate actions are organized events which gets decided in company’s annual general meeting before announced through a stock exchange. These events often bring material changes to a company through changes to the capital structure as well as economic benefits to investors.
Listed companies announces corporate actions on its issued securities (equity/debt). A few reasons companies perform corporate actions are
- Distributing profits to shareholders (Dividends)
- Make share prices more affordable to small investors by announcing stock splits and reverse stock splits
Companies restructuring in order to focus on its core competencies (Spinoffs & merger CA events)
Due to COVID-19 global crisis situation, we may see impact on corporate actions as well. There are talks that Corporate action events are likely to be cancelled in some markets before distribution/payment date, this means shareholders might not receive dividends in coming quarters and if share price continues to fall, shareholder might sell the position in market which will further raise liquidity crunch in global markets
Another issue of concern is spike in number of credit alert counterparties. Due to ongoing pandemic situation, there has been chances of web frauds resulting in companies being categorized with credit alert risk
In order to maintain reserves and surplus, Companies for sure might not announce/distribute cash dividends in coming quarters. Investors will have to remain patient in these difficult times and wait for right opportunity to buy/sell positions