In the business world, companies have various strategies to strengthen and grow their business. One way is through corporate actions. Corporate actions are activities or policies carried out by companies (especially a public company that is listed on Indonesia Stock Exchange/IDX) which affect the company’s shareholders and/or bondholders. Each corporate action is approved by shareholders through a General Meeting of Shareholders (GMS).
In general, corporate actions can be grouped into two main categories. First, those related to the number of shares in the market, such as dividend distribution, bonus shares, stock splits, reverse stock splits, buy back, and rights issue. Second, those related to corporate restructuring, such as mergers, acquisitions, tender offer, spin off, and the appointment of commissioners and board of directors.
For investors, corporate actions are important to know because they reflect the strategic direction and future prospects of a company. Corporate actions are the implementation of a company's growth story, steps that strongly and sustainably grow the business in the long term. Information related to corporate actions can be taken as a consideration and analysis in investing. However, many terms and types of corporate actions that appear in the news can confuse investors, especially for new investors in understanding the purpose and impact of these corporate actions.
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Stock Split and Reverse Stock Split
Initial Public Offering (IPO)
An Initial Public Offering (IPO) is a process of transforming a company into a public company by selling part and/or all of the company through an initial public offering (in a primary market), the ownership of the company/share can then be traded through the secondary market.
Simply, a company's initial public offering or IPO is a corporate action to obtain new funding, whether to increase business capital, expand business, or pay off debt. This corporate action is expected to add value to the company, enhance its reputation, and improve good corporate governance (GCG) and transparency in a more professional way.
Mandiri Sekuritas as one of the leading investment banking in Indonesia, can assist companies to conduct an IPO through end-to-end underwriting services for prospective companies wishing to go public.
Mergers and Acquisitions (M&A)
Merger is a corporate action that combines two or more companies into a new company and discontinues the operations of the old companies. Usually, the companies that are dissolved or have their activities discontinued are the smaller ones. Meanwhile, the larger company will be retained in terms of both their names and legal status. Example: when Bank Mandiri Syariah, BRI Syariah, and BNI Syariah merged to form Bank Syariah Indonesia (BSI).
Meanwhile, acquisition is takeover of another company by purchasing a majority or all of its shares. Through acquisitions, the purchasing company gains control over the acquired company. In short, an acquisition is a merged of two companies by purchasing a portion of shares, but both companies remain independent with control held by the purchasing/acquiring company.
Changes in ownership have a significant impact on the company operational, whether in the form of a merger or acquisition. News about M&A is important for investors to pay attention in order to analyze the newly formed company or the acquired company. M&A can affect the share prices of the newly formed company, the acquiring company, and the acquired company.
In 2023, Mandiri Sekuritas successfully completed the largest M&A transaction in the history of the telecommunications sector in Indonesia, the merger of Indihome and Telkomsel, a subsidiary of PT Telkom Tbk with a value of IDR78 trillion. Mandiri Sekuritas provides M&A advisory services to companies looking to do corporate actions. Contact Mandiri Sekuritas to discuss strategic and reliable merger and acquisition plans for your company.
Dividend
Dividend is a distribution of profits earned by a company to its shareholders. Dividends are distributed based on the percentage of shares owned by each investor or according to the number of shares owned. Dividend can be distributed in cash (cash dividend) or shares (stock dividend) or both. Dividends can be distributed 1 to 4 times a year after the company publishes its financial reports. The dividend distribution schedule will include dates such as the cum date, ex-date, recording date, and payment date.
Dividend payments indicate the company's profitability and management commitment to the shareholders. Note that, dividend distribution is not mandatory. Not all public companies will distribute dividends to their shareholders when they make a profit.
Rights Issue
Rights issue is the issuance of new shares to the market by an issuer, with existing shareholders given the special rights to purchase new shares at a special price, before the new shares are offered to the public. The mechanism involves issuing new shares that can only be purchased in advance by existing registered shareholders of the company (those who have special rights). If the investors did not use their rights, their ownership share will be diluted. Rights Issue is part of a mandatory corporate action which aimed to increasing the company's capital (fundraising).
Private Placement
Beside rights issue, there are also other parties that can purchase shares in advance, before they are offered to the public. These parties can be called Private Placement. They can only get these rights if approved at a General Meeting of Shareholders (GMS). Private placements are conducted privately by issuing new shares to specific investors without going through the regular trading mechanism on the stock exchange. Private placement is voluntary corporate actions which aim at raising capital/fundraising. Usually, private placements are carried out quickly due to the company's need to raise capital, expand its business, or pay off debts.
Stock Split and Reverse Stock Split
Stock split is a corporate action dividing one share into several shares with a smaller price nominal, thereby increasing the number of shares in the market. The goal is to increase the liquidity of the shares and reduce the price per share to make it more affordable, to maintain investor interest. With a stock split, the number of shares issued by the company will increase. However, this will not affect the proportion of shares owned by existing investors.
Conversely, reverse stock split is a corporate action that involves combining several shares into one share with a larger price nominal in order to reduce the number of shares in the market. The purpose of a reverse stock split is to raise the share price. Reverse stock splits are usually made by companies whose share prices are very low (usually below Rp50) to avoid delisting. For example, PT ABCD carried out a reverse stock split with a ratio of 2:1, meaning that every 2 shares worth Rp50 would be combined into 1 share worth Rp100.
Divestment
Divestment is a corporate action involving the sale of some assets, business units, or subsidiaries of a company. Divestment is carried out for various reasons, such as focusing on core businesses, fundraising, or reducing debt. The main purpose of divestment is to minimize losses by clearing up non-performing assets and minimizing the potential for new losses in the future.
Buyback
Buyback is a corporate action in which a company repurchases its own shares on the secondary market or those already in public. The goal is to increase the Earnings Per Share (EPS) because the number of shares in circulation is reduced, to prevent unwanted acquisitions, or as a form of value return to shareholders. Usually, companies do buy back when their share prices are considered undervalued. Buybacks also aim to prevent a downtrend, especially during a bearish market or market crash. A buyback action gives signals to investors that management believes the share price is cheap or undervalued.
Bonus Share
Bonus share is a corporate action that distributes free additional shares by the company to shareholders, without any specific conditions. The number of bonus shares distributed depends on the percentage of ownership of each investor. This action aims to reward investors without spending cash. Bonus share increases the number of shares in total, but does not affect the overall value of the company's equity. Bonus share originates from share capitalization (the difference between the selling price of shares above their value) or detained profits of the company. Share capitalization itself is determined during an IPO or when a rights issue is undertaken.
As the best securities company in Indonesia1, Mandiri Sekuritas provides comprehensive investment banking and brokerage services for institutional investors as well as individual or retail investors. With more than 25 years of experience, Mandiri Sekuritas, a subsidiary of Bank Mandiri, is supported by an experienced team for corporate action and brokerage services.
1Best Securities House, Euromoney Awards 2025 dan No. 1 Brokerage by transaction value in Indonesia capital market with transaction value amount of IDR403,88 trillion from 1 January until 20 August 2025 period, Bloomberg League Table
