if a company gets bought, do I get the new companies stock?

Question

If I buy a company, then that company is purchased in a take over, how does the transition of my stock work? Do I now have an equal amount, to the number of shares held previously, with the new company? How much would each share be worth?

Answer 1

There are several different things that could happen.

1. The company is purchased with cash -- in which case you turn in your shares and get cash.

2. The company is purchased with stock. In this case, a ratio of shares is set -- it need not be one-to-one. It differs in every deal.

3. The company is purchased with "units" -- which is a combination of financial instruments. In this case, the shareholders are often paid a cash dividend, receive shares of stock in the new company and can also receive other financial instruments like debt in the new company or warrants (long term options) to purchase shares in the future.

As for what they are worth -- it depends on the deal and what the market is willing to pay for the new financial instruments.

If you keep your shares in a brokerage account, the brokerage usually takes care of everything for you. If you have the certificates, then you may need to contact someone about what to do.

Answer 2

The acquisition could be for stock, for cash, or for some combination of the two.

If it is for stock, part of the buyer's tender offer would be the exchange ratio of acquiree shares to acquiror's shares. Basically, the sale price of the company being acquired would be determined and then the exchange ratio would be set based on the per-share market value of the buyer and the number of shared necessary to cover the agreed purchase price.

In most transactions, the buyer has a transfer agent (typically a bank, trust company or brokerage) that handles the exchange of old (acquired company) shares for new (buyer) shares at the agreed exchange rate (and normally without an exchange fee).

If the buyer is a publicly traded company, you should be able to get a quote either published by an exchange or (for more closely held public companies) from the broker who makes the market in the company;s shares. Supply and demand will ultimately drive the share price and frequently the buyer's stock will move up or down as a result of the market's perception of the deal.

Answer 3

All of that will be determined in the course of the sale, usually preliminarily when they announce it. If its a public company being taken private, you will get cash for your stock at a set price.

If another public company buys it you'll probably get their stock at some ratio to your own (e.g. for every 2.4 shares you get one of theirs). Or maybe some combination of the two.