What should I do if corporate actions such as stock consolidation/delisting/stock split/dividends occur during margin trading?

During margin trading and short selling, when corporate actions (such as stock consolidation, delisting, stock split, dividends, etc.) occur, investors need to understand the corresponding processing procedures and potential impacts. The following is a detailed guide for handling these corporate actions:

1. If a corporate action occurs during Hong Kong stock short selling, who does the equity belong to? How should it be handled?

According to the Securities Lending Agreement, if a corporate action occurs on the corresponding shares during the period when the securities borrower borrows securities, the securities borrower shall return all corresponding equity of the borrowed shares to the lender. Among them, for equity that is easy to buy in the market, the securities borrower will pay the equity corresponding to the borrowed shares and return it to the securities lender. For equity that is not easy/cannot be bought in the market, the securities borrower must close all short positions held within the specified time to ensure that the corporate action equity can be obtained by the lender.

2. Cash Dividend / Special Dividend / Stock Dividend / Bonus Shares / Stock or Cash Option

For cash dividends, special dividends, stock dividends, bonus shares, and stock or cash options, the equity generated by these corporate actions belongs to equity that is easy to buy in the market. When the shorted stock you hold undergoes the above corporate actions, the short seller needs to pay the corresponding dividend to the counterparty. You can choose to actively close the position before the corresponding time to avoid paying additional losses. If you do not close the position before the corresponding date, the system will automatically freeze your funds and deduct the corresponding funds on the corporate action equity distribution date. Note: Specifically, if the corporate action is bonus shares/stock or cash option, the system will freeze your account funds at an estimated price and deduct them on the equity distribution date to buy back the corresponding shares. For bonus shares, frozen funds = number of positions * bonus share ratio * settlement price of the previous trading day; for stock or cash options, frozen funds = number of positions * dividend per share. The frozen funds do not represent the actual deduction amount, and the final amount is subject to actual deduction. After the deduction, your account may enter a dangerous state due to insufficient frozen funds. Please be aware.

3. Stock Split/Consolidation, Code Change

For stock splits/consolidations and code changes, no additional fees will be incurred for short selling. BiyaPay will perform corresponding operations according to the listed company’s announcements.

4. Other Corporate Actions

For other corporate actions such as rights issue/subscription rights, acquisitions, delisting, voting, etc. (all corporate actions except the above), the equity of these corporate actions is not easy/cannot be bought back from the market. When the listed company to which your shorted stock belongs issues an announcement and one of the above corporate actions occurs, the system will send you a message notification. You can choose to actively close the short position before the specified date in the message. If you do not close the position before the specified date, the system will force close the position at market price on the forced liquidation date specified in the message.

5. Risk Statement

   1. Corporate action equity may become a significant cost of borrowing securities and should be considered in advance.

   2. Due to the risk of corporate actions being canceled or changed at any time, BiyaPay may still proceed with the above processing at the time notified to you if it fails to obtain the latest information in time after the corporate action is canceled or changed.

   3. The time between the announcement of corporate actions and the actual occurrence of corporate actions may be very short, and you may be forced to close positions within a very short time after receiving the message.

   4. Corporate actions are inherent risks of short selling transactions. You need to understand and carefully consider this risk in advance before deciding to open a short position.