Do corporate actions change the overall value of my investment?

It depends on the nature of the action. Activities like stock splits or bonus issues simply adjust the number of shares and price in the same proportion, which means the overall value remains unchanged. However, dividends, buybacks, and M&A activity can affect actual value.

What should I do when a rights issue is announced?

Firstly, check why the company is raising the funds. If the organisation is financially strong and is raising capital for expansion, you may benefit when you subscribe at a discounted price. However, if this corporate action is being taken to reduce stress or repay debt, proceed with caution. If you don’t want to subscribe, you can even renounce or sell your rights.

Are stock splits always good for investors?

There’s no gain in terms of the intrinsic value of a stock when it splits. However, they improve affordability and liquidity. Due to the lower price of the stock, new retail investors find it attractive, which eventually increases the trading volume. This has a positive influence on the sentiment of investors. As an investor, your concern should be whether or not the company is likely to provide you with long-term growth.

How do mergers affect my existing shareholding?

Your existing shares may get converted into shares of the new entity based on a pre-decided swap ratio during a merger. This implies that you may end up with more, fewer, or differently valued shares.

Should I participate in buybacks?

You can decide to participate in a buyback as long as the company is fundamentally sound. It must offer a price higher than the market value