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Consideration types
What is consideration in a corporate action?
‘Consideration’ refers to what you receive in exchange for your existing shares during a corporate action – typically cash, shares or a mix of both. While most common in mergers and acquisitions (M&A), it can apply to other events that change the structure of your investment.
Here’s a breakdown of when consideration applies, what it means for your holdings, and what to do next.
When consideration applies
Corporate action |
Why consideration applies |
Action type |
|---|---|---|
Mergers & acquisitions (M&A) |
Your company is acquired. You receive payment for your shares – in cash, stock or both. |
Mandatory |
Tender offers / share buybacks |
A company (or third party) offers to buy back shares from you at a set price. |
Voluntary |
Spin-offs |
A business division is separated into a new, publicly traded company. |
Mandatory |
Conversions of securities |
Convertible securities (e.g. preferred shares or bonds) are exchanged for common stock. |
Voluntary |
What this means for your securities
Corporate action |
Form of consideration |
Impact on your original shares |
|---|---|---|
M&A (all-stock) |
Shares in the acquiring company |
Your shares are swapped for new ones at a set ratio. |
M&A (all-cash) |
Cash |
Your shares are cancelled and removed from your account. |
M&A (stock & cash) |
Shares in the acquiring company plus cash |
The nominated shares are swapped for new ones at a set ratio. The remainder are cancelled when the cash consideration is paid. |
Tender offer |
Cash or alternative securities |
Shares you tender are bought and cancelled. |
Spin-off |
Shares in the new company (in addition to existing) |
Your original shares drop in value, and you receive new shares. |
Conversion |
Common stock |
Your convertible security is exchanged and cancelled in favour of common shares. |
What you need to do
Your next step depends on whether the corporate action is mandatory or voluntary:
Action type |
What happens |
Your next step |
|---|---|---|
Mandatory |
Stake’s broker processes the exchange automatically. |
No action needed – check your account for new shares or cash once processed. |
Mandatory with choice |
You’re offered a choice (e.g. cash vs shares). |
Submit your election form before the deadline, or the default option applies. |
Voluntary |
You choose whether or not to participate. |
Actively instruct the broker if you wish to take part, otherwise nothing changes. |
Tax considerations
Receiving cash as consideration – such as in an all-cash merger or a tender offer – can trigger a capital gains tax event. We recommend speaking with a tax professional to understand how it may affect your individual situation.
Important
Please note that corporate actions are decisions made solely by the issuing company and are outside of Stake’s control. While we facilitate and process these actions on your behalf, all details and timing are determined by the company.
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