Odd-Lot Offers, Schemes of Arrangements and Mergers

Corporate actions are events initiated by a publicly traded company. These actions have a direct impact on its shareholders and the overall structure of the company.

These are often crucial for the stock's financial health, ownership, and capital structure. Corporate actions can be mandatory or voluntary and are subject to regulatory approvals in many cases. You may have seen some of these in some of the companies you invest in, such as Odd lot offers, Schemes of Arrangements, Mergers, IPOs, Dividends and more.

Here are examples in greater detail:

Odd-Lot

An odd-lot refers to a quantity of shares that is less than the standard trading unit on a stock exchange. In most markets, the standard trading unit is typically 100 shares. So, any transaction involving a number of shares that is not a multiple of 100 is considered an odd lot. Odd lots may be bought or sold by individual retail investors or smaller institutions.

Scheme of Arrangement

A Scheme of Arrangement is a formal legal process used by companies to reorganize their capital structure, business operations, or ownership. It is typically employed for significant changes such as mergers, acquisitions, demergers, amalgamations, or corporate restructuring. The process involves obtaining approval from relevant regulatory authorities and the company's shareholders. Shareholders usually vote on the proposed scheme to either approve or reject it.

Mergers 

A merger is the combination of two or more companies into a single entity. It often occurs when two companies believe they can achieve more significant growth and synergy together than they could independently.

Mergers and schemes of arrangements can result in delisting through various mechanisms:

Mergers: In some cases, one of the merging companies may be absorbed into the other completely. As a result, the delisted company's shares may cease to exist, and shareholders typically receive shares of the surviving company or cash for their shares.

Scheme of Arrangements: If the shareholders and the regulatory authorities approve the scheme, it may result in the delisting of the company's shares from the exchange.

Both mergers and schemes of arrangement can result in cash consideration. In a merger, the acquiring company may offer cash as part of the consideration to the shareholders of the target company. Similarly, in a scheme of arrangement, the arrangement can include a provision for cash consideration to be provided to the shareholders of the company being acquired or merged.

A merger or scheme of arrangement may sometimes trigger a trading suspension until the corporate action is finalized. If there are any disagreements, the merger and/or scheme of arrangement might not take place at all, and trading will resume. Trading suspension is not a corporate event, and no trading can take place during this period. Some suspensions might be lifted, while others may lead to delisting and removal from the exchange.

Delisting can happen voluntarily or may be enforced by the exchange if the company no longer meets the listing criteria. You can read more about delisting here.