What is a corporate action?

A corporate action occurs when a company makes a decision affecting shareholders and results in a significant change to a company's stock. This can take the form of a mandatory or voluntary corporate action.

A mandatory corporate action is an action affecting all shareholders initiated by the board of directors. Participation of shareholders is mandatory for these corporate actions. M1 will make sure to handle mandatory corporate actions according to the company's instruction.

Below is an overview of the mandatory corporate actions on M1 Finance.

A merger can occur when a company absorbs, or merges, with another company. The purchasing company may choose to allocate shares, cash, or a combination of the two for the shares of the acquired company.

A stock merger occurs when the shareholders of the old stock receive shares of the new company.

Please note: In the event this occurs, you may add a slice in your Pie that corresponds with the received security. In the event your symbol is not added to your portfolio, the new symbol will be received and placed outside your Pie.

Example: XYZ Co. decides to buy FunTech Co.

XYZ Co. decides to issue two shares of XYX for every share of FunTech Co. the shareholders held. FunTech owners now own XYZ Co. shares and FunTech Co. stops trading on the market.

A cash merger occurs when the shareholders of the old stock receive cash in return for the old stock.

Please note: In the event this occurs, the cash will be automatically applied to your account's cash balance. If Auto-Invest is turned on, this cash may be allocated and re-invested into your portfolio.

Example: XYZ Co. decides to buy FunTech Co.

XYZ Co. decides to issue $5 for every 1 share of FunTech Co. the shareholders held. FunTech Co. stops trading on the market.

A stock & cash merger occurs when the shareholders of the old stock receive shares of the new stock plus a cash amount.

Please note: In the event this occurs, you may add a slice in your pie that corresponds with the received security. In the event your symbol is not added to your portfolio, the new symbol will be received and placed outside your Pie. Cash received will be automatically applied to your account’s cash balance. If Auto-Invest is on, the cash may be allocated and re-invested into your portfolio.

Example: XYZ Co. decides to buy FunTech Co.

XYZ Co. decides to issue two shares of XYX and $5 for every share of FunTech Co. the shareholders held. FunTech owners now own XYZ Co. shares, are issued cash, and FunTech Co. stops trading on the market.

An acquisition occurs when one company takes over another company. In the event this occurs, the company being bought becomes an inactive Slice in your Pie.

The inactive Slice will remain in your portfolio until you manually remove it.

To remove the inactive Slice:

Please note: You won’t be able to remove the Slice or save Pie edits by setting the inactive Slice to 0%.

The trading system still works while you have an inactive Slice in your portfolio. However, you cannot place buy or sell orders for an inactive Slice as it is no longer trading.

A company will issue a stock split when they want to either increase or decrease the number of shares outstanding. On M1, you do not need to do anything on your account. We will take care of it for you!

Please note: The value of your shares will stay the same.

When a company issues a forward stock split, the number of shares outstanding will increase, while the stock's share price will decrease.

Example: You own 150 shares of FunTech at $10 per share. FunTech decides to offer a 2-for-1 (2:1) forward stock split because of an increase in their stock’s value. After the split occurs, you will own 300 shares of FunTech at $5 per share.

When a company issues a reverse stock split, the number of shares outstanding will decrease, while the stock's share price will increase.

Example: You own 300 shares of FunTech at $5 per share. FunTech decides to offer a 1-for-2 (1:2) reverse stock split because of an decrease in their stock’s value. After the split occurs, you will own 150 shares of FunTech at $10 per share.

NOTE: Your performance on your portfolio may be incorrect for a day or two while the split processes. Cost basis may also take a few days to update to account for the split.

A company’s ticker symbol may change because of a company name change, corporate action, or the symbol is trading on a new exchange. In your M1 account, symbol changes are automatically adjusted with no action necessary on the user end.

Please note: Symbol changes are different than stock mergers where shares of a new company are received due to being a shareholder of another company. Instead, you will own the same number of shares of the new symbol.

Example: Company XYZ announces their ticker symbol will be changed to XYZX. On the ex-date for this mandatory corporate action, XYZ will be inactivated and all pies holding XYZ will have the slice changed to XYZX.

A company issues a spin-off when it decides to create a new, independent company under its parent umbrella. When this happens, the parent company may decide to issue shares of the new independent company to the existing shareholders of the original company.

Please note: In the event this occurs, you may add a slice in your pie that corresponds with the received security. In the event your symbol is not added to your portfolio, the new symbol will be received and placed outside your Pie.
​

A delisting may occur when a company no longer trades on an exchange. This generally means when a security has been removed from a major exchange and is not traded on the OTC markets.

In the event of a delisting, your security will remain in your portfolio until you remove it. You will not be able to purchase any more shares, but you are able to liquidate the shares if the company still trades.

A company may participate in a voluntary corporate action for its shareholders. This action may include the company repurchasing shares or selling newly issued shares at a specified price. These offers are typically only for existing shareholders and may come with an expiration date for the offer.

Below is an overview of a few voluntary corporate actions and the process to participate as a shareholder.

A tender offer allows existing shareholders to tender or sell their shares at a specified price determined by the company. Current shareholders will receive a notice via mail or email with the terms of the offer and the expiration date for instruction.

Example: Company ABC might be trading at $50 per share on the exchange. The company may present its shareholders with an offer to tender their shares at $55 per share, with the offer expiring in 2 weeks. As a shareholder, participation is completely voluntary so the shares do not have to be tendered and can remain in the brokerage account. If the shareholder wishes to tender their shares, they will receive a cash payout for shares previously held, multiplied by the offer price.

If you received a tender offer in the mail or from an email, contact us with your instructions.

The final voluntary action is a rights offering, allowing current shareholders to purchase newly issued shares of company stock at a specific exercise price. This offering takes place before the shares are offered to the rest of the public and do come with a short-term expiration date.

Example: A shareholder of company XYZ receives 100 rights to buy new shares at $25 per share. In this scenario, the shareholder may participate in the rights offer and purchase new shares. The customer must have cash available to pay for the new shares upon exercising the right. This offer is completely voluntary and may expire without instruction or participation.

If you received a rights offering in the mail or from an email, contact us with your instructions.

Another voluntary action is a warrant which allows current shareholders to buy additional stock at a fixed price, otherwise known as the exercise price. Warrants typically have a longer duration until expiration, unlike other voluntary corporate actions, and may not expire for several years.

Example: Company ABC issues warrants to buy 5 shares of stock at a $20 strike price and a shareholder receives one warrant. The warrant has an expiration date in five years. Once the market price of ABC rises to $25 per share, a shareholder might exercise their warrant allowing them to buy the 5 shares at the $20 strike price instead of the current market price. This action is completely voluntary, so the warrants may expire without an action taken.

If you received a notice about a warrant and would like to take action, contact us with your instructions.

All investing involves risk, including the risk of losing the money you invest. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.

Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.

All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.

Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.

​20240530-3614729-11474780