If i own stock for a company and that company might be bought over by another company what happens to my stock

Question

The company I own might be bought by another company and if they are the other's companies name would be the new name? Should a person buy the stock before that happens? Or should we wait?

Answer 1

Mergers are announced ahead of time. So, if you want to sell your existing shares before the merger -- you can do that through your broker. The price should reflect the merger price -- taking into account the probability that it will go through.

If you hold onto the stock until the merger, then a number of things could happen:

If your company is being bought for cash, you will be sent a check and your existing shares will be worthless.

If your company is being bought with new shares, then your existing shares will be exchanged for shares of the new company. If your brokerage has your shares, this will be done automatically by them. If you have possession of the shares, then you will have to exchenge them for new ones.

Sometimes the shares are exchanged for a combination of debt, equity and cash.

Answer 2

What happens to the acquired company's stock depends on the deal. Usually the acquiring company will pay you for your shares in cash or convert the acquired company's share into the acquiring company's share. Some use cash and stocks to complete the deal. If you know your company is about to be acquired, it would be best to buy it before the deal is announced. For other investment advice, see http://ibooyah.com

Answer 3

When a company is acquired or going to be acquired by another company, it will make a tender offer for publicly acquire the publicly held shares in which category your share belongs and in most times offer a premium on the market price. In another scenario if you don't intent to sell it at premium if the your company is acquired still then your stock will be swaped with the newly formed merged companies shares at a swap ration fixed by the merger company. You can also trade it in the secondary market on the news of the merger may be at premium on the market price. Usually the market value goes up on merger news. Nowadays publicaly held companies or corporations are never bought for cash. It used to be in the olden days when raiders used to do it to sell them piecewise later on. Such large cash is still not available in private hands to acquire. They have to go for lbo's or leveraged buy outs or junk bonds which are also out of fashion now.