Corporate action

How it works

A corporate action is anything an issuer does that changes the shares outstanding, the basis of the price, or the identity of the security. The common ones are splits and reverse splits, cash and stock dividends, spin-offs, rights issues, mergers and acquisitions, and ticker or name changes.

The mechanics run through a set of dates rather than a single one. The issuer declares the action and a record date; ex-date conventions then determine who is entitled — FINRA Rule 11140 sets how the ex-dividend date is established for transactions in the over-the-counter market. Announcing a record date too late is itself regulated: 17 CFR 240.10b-17 makes untimely announcement of record dates a prohibited act. Downstream, the events are distributed as reference data: Nasdaq publishes a Daily List of dividends, distributions and splits, FINRA publishes its own for OTC securities, and DTCC carries the whole lifecycle between institutions as ISO 20022 messages.

For anybody working with prices, all of that reduces to one problem. A four-for-one split quarters the price without anything happening to the company, so an unadjusted series reads as a 75 per cent crash on that date. Any high, low, close, return, moving average or volatility figure that spans the event is wrong unless the series has been adjusted — and volume has to be adjusted the other way.

The adjustment is a convention, not a fact

This is the part that surprises people. Splits are arithmetic and every vendor handles them the same way. Dividends are not: adjusting for them requires deciding whether the cash is reinvested, at what price, whether special distributions and return-of-capital count, how the factors compound, and how much of the history gets restated when a new one arrives. Every provider makes those choices, few document all of them, and the results differ — which is why the same ticker's adjusted close on the same day is not the same number at two vendors.

Spin-offs and mergers are worse, because the security itself changes. A spin-off splits one price history into two, and whether the parent's history is adjusted for the value that left is a judgement. A ticker change breaks a series unless the vendor carries a permanent identifier underneath the symbol, which is the problem identifiers exist to solve.

Why it matters here

Three questions to ask of any price source on this site, and they are the questions the cards try to answer. Which adjustment convention does the adjusted series use? Can I get unadjusted prices alongside it? And does the history keep securities that have stopped trading, or does it quietly drop them?

Vendors built around this problem say so, and they are a different shape from an API that happens to return a close price. Norgate Data and CSI Data sell adjusted-and-unadjusted history with the corporate actions as their own product; a general market data API usually gives you one adjusted series and no way to see the factors behind it. If a number has to reconcile against a statement, you need the unadjusted print; if it has to be comparable across a decade, you need the adjusted one; if both, you need a source that keeps both.

Why adjusted close differs between providers works through the arithmetic and the specific conventions, and how to download historical prices in Python is where this bites first in practice.