Company divesting, mergers, splits etc, what happens to the shares?

Freetrade Chat šŸ”„
#1

In the case of both IBM and GSK in the coming years, both have plans to split their companies in to 2 seperate companies. In the instance where that company would issue all shareholders on record with shares in both the new and old company. Does Freetrade support this on their side so I would get shares issued in both GSK1 and GSK2 or would it be a scenario where Freetrade forces a sale to cash before this happens instead.

Iā€™m obviously looking to not have my shares sold to cash and would assume the former option would be the way it would be dealt with but just wanted to clarify please.

#2

If a completely new company is created, youā€™ll probably be automatically given shares of the new company. You should be notified of this when it happens by means of a ā€˜corporate action notificationā€™, although Iā€™m not sure how Freetrade communicates those. Your old shares will drop in value, because part of the original company isnā€™t there anymore, but your new shares should be worth about as much as the drop in the original shares depending on how the market views the prospects of the two new companies compared with the one original one. Alternatively, a company might just sell part of its operations to another company, or to private investors, in which case your holdings as an investor in the original company wonā€™t change, but your shares might change in value.

See for example: Freetrade blog post on corporate actions (about 2/3 of the way down the page under ā€œSpin-offs/de-mergersā€), or Investopedia article on spinoffs

#3

Fully expecting the values to change, more or less half. I just wanted to make sure that they donā€™t sell off on my behalf before hand is all.

Im wanting like you suggested, shares in both companies which in total should add up to the combined value of the previous singular company if not more as sometimes they get a premium valuation when seperated.

#4

Thanks for the link to that. It pretty much says that Freetrade will sort it on their end. The answer is was looking for. Thank you