How to run a stock split on Carta
When a forward or reverse stock split needs to be reflected on a company account, a Legal Administrator on the account should reach out to Channel Support team by emailing firstname.lastname@example.org with the following information to request the split and expedite the process:
- Effective date
- Split ratio e.g. Before 1, After 10
- Share classes affected
- Confirmation of the following;
a. Cap table is up-to-date as of the effective date of the split
b. There are no current/pending transactions
c. The ability to exercise online is turned off (temporarily)
Upon receiving a stock split request with this information, a Support Analyst will then pick up the request and proceed to model out the stock split in our Sandbox (test) environment to ensure the split is accurately executed and approved prior to implementation on a live account. Once a stock split is executed on the live environment, it is an irreversible action.
Upon modeling the split, the Support Analyst will transfer the modeled reports via Carta’s document transfer tool. (These reports can be viewed in your “Downloads” area located in the top right corner of your screen once you login to your Carta account.) You will be provided with four reports that can be downloaded for review:
- the day before the split date
- the day of the split date
- the day after the split date
- the day the split was modeled (today)
Please use these reports to verify post-split numbers on certificates and share class level are all correct based on the split ratio submitted for use. At this time of review, the Legal Admin will also review vesting schedules for securities impacted by the split to ensure the data is carried over correctly. This can be done via Vesting and Cap Table Security Ledger reports to ensure VCD and schedule names are correct (typically only needed for reverse splits).
Please note that Carta’s split tool will process a split on a certificate-by-certificate basis (Not an Aggregate Total), and the tool will always round down to the next full share if a certificate’s post-split quantity results in a decimal value.
Reverse Stock Splits can lead to certificate quantities that need to be adjusted due to rounding or split ratios being applied, and these can be corrected by the Support Team with notification from the Legal Admin. Please provide a detailed list of the certificates that need to be adjusted, along with their corrected share quantities. Once received the Support Analyst will bulk update those quantities on the modeled Sandbox account to ensure all data is correct before executing the split on a live account***.
*** The sandbox (test) environment resets each night at 11:59 p.m PST. If more time is needed to review in-app, please let the Support Analyst know ***
Once a stock split is executed, the following updates will be made to the account:
- Certificates impacted will be split
b. Price per share
- Equity plan (if associated share class is being split)
a. Quantity of option grants
b. Equity plan size
- New certificates or equity awards will appear in the stakeholders account and do not need to be re-accepted
Updates that need to be done manually by a Legal Administrator are:
- Authorized shares
Updating the Fair Market Value (FMV) on the Account
The fair market value will need to be manually adjusted following the execution of the stock split. This can be updated by adding an FMV through the 409A page found under the Compliance tab.
Exercises Pending on the Account
Any exercises pending on the account with an exercise date before the split date will need to be completed before the split can be executed. For exercises with an exercise date after the split date, the company will need to cancel the exercise request and re-process once the split has been completed.
Authorized Shares for Share Classes Update
Once the split has been executed on the live account it will be up to a Legal Admin on the account to go into the shares ledger and update the authorized shares for each class.
Post Split Share Class Conversion Ratio Updates
If there are new share class conversion ratios to be implemented, any Legal Admin on the account can make those adjustments after the split has been executed via the Rights and Preferences page located in the Capitalization drop down, or by editing the share class.
Updating Certificate IDs
If there is a need to have specific security IDs on certificates resulting from a stock split, Legal Admins may request a Support Agent adjust these in bulk by sending over a list of the new certificates along with the requested ID numbering via an excel spreadsheet.