Hi all, I’m currently analysing contract notes for a client, and I came across this value in the description field: “REMOVE, From QTY:-300, To QTY:100, Position Value:1261.5”, and also: “ADD, From QTY:-300, To QTY:100, Position Value:1261.5”, in front of stock splits. What do these mean precisely? Thanks
@GursimarSinghMiglani What happens when a company declares a stock split? There are two types of stock splits and they are handled differently.
A ‘forward’ split happens when a company increases their outstanding shares. As an example with a 1:2 forward split, the existing shares stay the same but the shareholder is simply given 1 extra share for each share they already hold. This will show up as a single ADD line in activities.
A ‘reverse’ split is a bit more complicated and happens when a company effectively decreases their outstanding shares. There isn’t a process to ‘take back’ shares from shareholders, so the company first cancels all their existing shares (leaving those shares worthless), and then second gives each shareholder new shares (with a new CUSIP). In the case of a 3:1 split they would give each shareholder 1 share for every 3 shares they originally owned.
It appears the example in the post was a 3:1 reverse split? The first entry removes the existing shares and the second entry replaces those with fewer new shares. The entries are a bit obscure, but that is what’s going on.