Proration

Proration is a situation that can arise during a specific corporate action, such as an acquisition. In certain situations, the acquiring firm will offer a combination of cash and equity, and shareholders of the firm being acquired can elect to take either. Following the shareholder election, the remaining stock is prorated if available cash or shares are not sufficient to satisfy the offers that shareholders tender. If this occurs, the company grants a proportion of both cash and shares for each offer tendered so that everyone still gets its fair share of the deal. Pell grants can also be prorated under specific circumstances, allowing someone to be paid to go to college.