Corporate Actions

What is a corporate action?

A corporate action is any event initiated by a company that affects its securities—stocks, bonds, or other instruments—and typically requires updates to records, valuations, or entitlements for investors. Common examples of corporate actions are dividends, stock splits, mergers or acquisitions, spin-offs (creating a new, separate company and giving shares to existing holders), rights offerings (offering existing shareholders the chance to buy more shares at a discount), and (for bonds), bond calls or redemptions.

How do corporate actions affect Ondo tokenized stocks?

Each type of corporate action has different results. Continue reading for more detailed information.

How are dividends handled?

Dividends are automatically invested back into the referenced stock and reflected in token pricing. Minting and redemption quotes reflect both price changes and reinvested dividends. For a more detailed example, see the section about how Ondo tokenized stocks are priced.

Is trading halted during dividends?

Trading may be paused for a given stock or ETF for short time immediately before and after the start of the ex-dividend date. The exact duration of these pause may change over time as we try to shorten it, but for now you can assume trading may be paused 7:50:00pm-8:10:00pm the day before the dividend ex-date.

There is an exception to this rule, however. Unlike traditional stock dividends from individual companies, which are typically declared by the board of directors weeks or even months in advance with a fixed amount, ETF distributions (especially from fixed income funds) are often calculated based on the accrued income from underlying holdings like bonds, which can fluctuate due to interest payments, premium amortization, discount accretion, expenses, and other factors.

This means the exact distribution amount is frequently finalized and announced very close to the ex-date—often just 1-2 business days before, or even after hours on the day prior to the ex-date. As a result, the exact amount of this dividend may sometimes not appear in our data feeds for up to 24 hours.

In these cases, the platform will halt trading until the exact amount of the dividend is known. Trading will resume as soon as the system can incorporate the dividend amount and appropriately increase the number of shares per token.

You can always check for upcoming dividends, as well as any tokens that are halted, at status.ondo.finance (opens in a new tab)

What is an ‘ex-dividend’ date?

When a company decides to pay a dividend (a portion of its profits) to its shareholders, it sets a few important dates to organize who gets the money. Two key dates are the record date and the ex-dividend date (or ex-date). These dates help decide who qualifies for the dividend.

1. Record Date: This is the day the company checks its list of shareholders to see who owns the stock and is eligible to receive the dividend. Think of it like the company taking a snapshot of its owners.
2. Ex-Dividend Date (Ex-Date): This is the day when the stock starts trading without the dividend included in its price. If you buy the stock on or after this date, you won’t get the upcoming dividend. If you buy it before this date, you’re eligible for the dividend.

In the past, stock trades took two business days to "settle" (i.e. “trade + 2 days” or T+2), meaning it took two days for the buyer to officially become the owner of the stock. Because of this delay, the ex-date was set one day before the record date to give the trade time to settle, ensuring the buyer was on the company’s list by the record date.

Now, with T+1 settlement, trades settle in just one business day. This means if you buy a stock the day before the record date, your purchase settles in time for you to be on the company’s list. As a result, the ex-date and record date are now the same day for most regular dividends.

As an example, imagine a company announces it will pay a $1 dividend. It sets:

• Record Date: July 10 (the day it checks who owns the stock).
• Ex-Date: Also July 10 (because of T+1 settlement)

Here’s how it works:

• If you buy the stock before July 10 (say, on July 9 or earlier), your trade settles by July 10, so you’re on the company’s list and get the dividend.
• If you buy the stock on or after July 10, you won’t get the dividend because you’re not the official owner until the next day (July 11), after the record date.

What about other corporate actions?

• Earnings: we may pause certain stocks around their earnings announcements, with the timing varying depending on the announcement time. For pre-market announcements, we may pause 5:00:00am-9:31:00am. For post-market announcements, we may pause 4:00:00pm-7:30:00pm. In the event that we pause we also may manually un-pause at any time during any of these windows, and may re-pause and un-pause multiple times in any of these windows.

More information about other corporate actions will be provided soon.