How dividends are reinvested into NAV, and how splits, spin-offs, mergers, and name changes are absorbed transparently.
Dividends and corporate actions are reflected in the on-chain NAV of the token rather than as separate cash distributions to your wallet. The economic effect is identical to a traditional brokerage account — only the surfacing differs.
When the underlying company pays a dividend, the cash is used to buy back more of the underlying shares, and the on-chain NAV of the token increases accordingly to reflect the added shares-per-token. You see the dividend value in the token's price rather than as a separate cash distribution.
For other corporate actions — stock splits, special distributions, spin-offs, mergers, name changes — the on-chain NAV is updated to fully reflect the action. The result is that your economic position tracks the underlying instrument exactly, with all corporate events absorbed transparently into the token's value.
Every adjustment is observable on-chain through the token contract.
Because dividends and corporate actions are reflected in NAV rather than as separate cash distributions, the dividend itself is generally not a taxable event under most jurisdictions — taxable events are typically triggered only when you realize a position. Consult a qualified tax advisor for guidance specific to your situation.
Reflecting dividends into NAV instead of distributing cash keeps the product simpler to operate, eliminates failed-distribution edge cases, and gives every user automatic dividend reinvestment by default. It is a strict superset of the brokerage experience for any user who would have reinvested the dividend anyway, and identical economically for any user who would not.
