Corporate Actions from Acorns

What is a Corporate Action?

An activity initiated by a public company that brings material change to an organization and directly or indirectly impacts its shareholders. There are a few forms of corporate actions - mandatory, mandatory with options, and voluntary. We can break down these forms of corporate actions into many types outlined below.

Mandatory Corporate Actions

A corporate action that is not optional to participate in and applies to all shareholders. These actions will be automatically applied to accounts holding the stock as of the eligibility date without any action needed from the customer.

Cash Dividend

A distribution made by a company to its shareholders out of its earnings in the form of cash.

Example: If you held 100 shares of ABCDE that paid a dividend of $0.25 per share, you would receive $25 total.

Action: None. Acorns will apply that cash amount and invest it towards your target Portfolio.

Stock Split

A company increases the number of shares outstanding by a multiple, typically done to help increase liquidity and make shares more affordable. The overall value owned by the shareholder does not change because the exact multiple adjusts the price per share as well as the number of shares.

Example: You hold 10 shares of ABCDE which is currently trading at $525 per share ($5,250 total market value). ABCDE decides to split at a 10:1 ratio, and you will hold 100 shares of ABCDE now trading at $52.50 per share post stock split (same value of $5,250)

Action: None. Acorns will automatically adjust your share quantity, and the stock will begin trading at the new price. There will be no change to your Account Value due to the split.

Reverse Split

Similar to a stock split, a reverse split decreases the number of shares outstanding at a ratio. In the same way the stock price adjusts by this ratio, the overall value owned by the shareholder does not change.

Example: You hold 10 shares of ABCDE trading at $30 per share (value of $300). In a reverse split at a 2:1 ratio, you would receive 1 share for every 2 shares held, so you now have 5 shares of stock ABCDE, which is currently trading at $60 per share (same value of $300).

Action: None. Acorns will automatically adjust your share quantity, and the stock will begin trading at the new price. There will be no change to your Account Value due to the split.

Mergers

A transaction that involves combining two companies into a new company. Mergers are typically done to combine synergies between two companies to help expand and create operating efficiencies.

Example: ABCDE and XYZ decide they would optimize their operations and execution within their industry if they were one cohesive unit. You hold 20 shares of ABCDE and, as a result of the merger, receive 2 shares of the new company ABYZ for every 1 share of ABCDE and $3 per share of ABCDE. You will now have 40 shares of ABYZ and $60 in cash.

Action: None. Acorns will process the merger by removing your old stock and updating your portfolio with the new post-merger stock. Any cash received will be reinvested into your target portfolio, similar to a cash dividend.

Acquisitions

When one company decides to acquire another company, the acquired company’s stock will no longer be listed to trade on an exchange. Sometimes this acquisition is an all-cash, all stock, or mix of cash & stock as a result of holding the acquired company's shares.

Example: You hold 10 shares of ABCDE, and XYZ acquires it for stock & cash. The ratio is receipt of 0.2 shares of XYZ and $5 for every share held of ABCDE. Once completed, you will now have 2 shares of XYZ and receive $50 in cash.

Action: None. Acorns will process the acquisition by removing your old stock and updating your portfolio with the new stock. If a cash-only purchase, you will receive cash that reinvests into your target portfolio and no longer hold or can trade the acquired company.

Delisting

It occurs when a company is no longer listed to trade on an exchange. There are many reasons for stock to delist, and it can be a voluntary or involuntary action by the company.

Example: There are many different reasons or criteria for delisting, to name a few, a company no longer operating, bankruptcy, mergers, failing to meet exchange listing requirements, or becoming a private company.

Action: When a stock delists, you will no longer be able to buy more shares of this company. You will continue to hold these shares in your portfolio until you take action to remove the shares.

Mandatory Corporate Actions w/ Options

Some mandatory corporate actions give the shareholders optionality on what they would like to receive as a result of the deal. Examples of these include Cash-Stock Options and Merger w/ Options. Usually, the option is whether to receive cash or stock due from the deal.

Action: For these events, Acorns’ custodian only allows shares to receive the default option determined by the issuer. There is no election required on these events.

 

Voluntary Corporate Actions

Tender Offer

An issuing company’s offer to purchase some or all of a company's shares at a specified price. There is a specified amount of time to accept the offer.

Example: You hold 20 shares of ABCDE that currently trades at $30 per share in the market. The issuer wants to take the company private and offers to buy back all the outstanding stock for $40 per share. You decide whether this is a fair price and accept the tender offer.

Action: We will need your election on these events. Acorns will send an email notification if eligible for the event with a summary of the event details, and a link to enter your election for the event. Our team will then note an election to tender shares, and you will no longer be able to trade the tendered shares. If the event is accepted, your shares will be removed and you will receive the resulting outcome.

Dutch Auction Tender Offer

A Dutch Auction Tender Offer is a process where an issuing company offers to repurchase a specific number of shares within a given price range. Investors can specify the lowest price in the range they are willing to accept. Typically there are three election options – No Action, Tender at a specified price (bid), and Tender at the unspecified price (selected within the given range based on election results).

Example: Similar to a Tender Offer you hold 20 shares of ABCDE that currently trades at $30 per share in the market. The issuer wants to repurchase 10 million shares at a price between $35-40. The shareholders will decide what price in the range they are willing to accept and the issuer to accept to reach their target repurchase.

Action: Currently, Acorns’ custodian only allows you to either tender at the unspecified price or take no action. Acorns will send an email notification if eligible for the event with a summary of the event details, and a link to enter your election for the event. Our team will then note an election to tender shares, and you will no longer be able to trade the tendered shares. If tendered shares are accepted, your shares will be removed and you receive the resulting outcome.

Rights Offer

Allows shareholders of a company to purchase new shares of the company at a specified price within a short time window. These Rights also are tradable in the market to participants who may want to hold these rights to exercise. All Rights are removed as worthless once the exercise period has expired.

Example: Company ABCDE wants to issue new shares to the market but first gives their existing shareholders the option to buy these shares first at a specified price. You hold 10 shares of ABCDE and receive 10 rights that you can exercise to buy 10 additional shares at $22 per share or $220 total.

Action: Currently, Acorns’ custodian does not support exercising Rights Offerings. However, we will notify you via email to determine whether you want Acorns to sell your rights in the market if they are trade eligible.