Splits and Spinoffs generally result in a combination of Corporate Actions. A split generally relates to a share conversion, either split or reverse split, effectuated at the closing price on the last day of trading. A Spinoff relates to when a single company is split into a new company, creating a new SYMBOL traded entity. It is typical that the Spinoffs also contain a share conversion.
- Splits are generally ‘straight’ through processing, where the calculations, and corresponding customer records impact are done overnight. On the morning after the effective day of split (which processes aftermarket hours on the split effective date), the share conversion will occur:
- Events API: Stock Split Event
- Once the split is processed, the customer record will reflect the correct shares, in accordance with the split conversion rate. In the customer account record, you will observe a remove share, and add share at the conversion rate (recording the unique legs of the transaction).
- Depending on whether the market price feed is being provided by DriveWealth, or the counterparty sources its own market data, will provide for two discrete scenarios. Depending on when the market data provider publishes the adjusted market data price, which includes the conversion rate for the share split, will impact the portfolio display amount for a period time to the customer. Meaning, market data providers provide the updated price and if share quantity processing and market data adjusted price feed to not update in unison, there would be a temporary (during non-trading hours) increase/decrease in the displayed equity value of the position.
DriveWealth Helpful Hint
For counterparties who do not source their own market data: If a customer holds 10 shares of ABC security which splits 2:1, the customer will end up with 20 shares. If the pre-split price at market close was $20, the customer at end of day would have a $200 market value (10 shares x $20). Once the split share conversion is processed share quantity will increase from 10 to 20, and share price will decline from $20 to $10. However, post-split price adjustments can be published any time from 6pm – 7am EST. During this period the customer may be displayed $400 market value (20 qty x $20 (unadjusted)). Once the adjusted price is available, it will automatically update.
- Spinoffs may or may not be announced to the market, prior to their public announcement and processing. This makes spinoffs one of the more challenging to communicate prior to occurring.
- Operationally, Spinoffs can include several different variables, including symbol changes, conversions (stock and cash), and the decrementing the value of the Parent Co., spinning off into the New Co.
- When a Spinoff is processed, there is typically a new symbol created, to which a portion of the Parent Co.’s value (share conversion at an agreed upon price) is assigned to the New Co.
- Event API: Spinoff Event
- Rights Offerings are standardized events that decrement the value of the Parent Co offering the right to purchase the parent line at a discount if a strike price is hit. The value of the rights could reduce the price of the parent line depending on the terms of the rights.
- When a Rights are processed, there is typically a new rights symbol created, to which a portion of the Parent Co.’s value is assigned to the new rights line.
Updated 2 months ago