In the Dugout: Understanding the Proxy

One of the difficult things to understand when it comes to the fundamentals of a company is the SEC filings that are released all the time. These filings are legally required of all publicly traded companies and can be very confusing to investors and traders. In this article, I would like to explain how a trader could use one of these filings, the DEF-14A, to help them predict stock split announcements.

The DEF-14A is also called a proxy. This SEC filing is sent out to shareholders to let them know the topics that will be discussed at the next shareholders meeting. The shareholder meeting is usually scheduled on an annual basis near the same time each year. Though special shareholder meetings can be announced, topics and issues to be voted on will always come out in advance on some sort of DEF-14A.

Though many sites will have access to viewing SEC filings, is a great place to find out about them.

When it comes to announcing a stock split, the board of directors can do so without approval from the shareholders. But, if there is a need to increase the number of authorized shares, then the shareholders must vote and approve the increase. Authorized shares are the number shares that are available to the company, but are not publicly traded. If a company has 100 million authorized shares and 75 million issued shares, then it needs to increase the number of authorized shares to at least 150 million to do a 2-for-1 stock split.

When viewing the DEF-14A filings, look for a paragraph under issues to be voted on which mentions an increase in authorized shares. This will be a sign the company is eyeballing a stock split announcement soon. It is possible for a company to announce a stock split in advance of getting approval, though the footnote to the announcement will state it is based on shareholder approval of an increase in authorized shares. A trader could check each day for the new DEF-14A filings or could search on an individual stock they feel is ready to announce a split but doesn't have enough shares.

"Articles are Courtesy of".

Return to the Dugout

home | contact us | advertising | affiliate program | disclaimer | cancellation policy
Copyright © 2000, inc.