If I have shares of stock in a small start up company and a large corporation buys them out, are the shares I own now worth the market price of the larger company?
2007-01-10 10:05:48 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
That depends on the acquisition price of your company, and the stock price of the acquiring company. Say for example that the acquisition price of your company is $10 a share. If it is a stock for stock acquisition, and the acquiring company's stock is trading at $20 a share, then for every two shares of stock you own, you will get one share of stock in the acquiring company.
2007-01-10 10:34:30 · answer #1 · answered by jseah114 6 · 0⤊ 0⤋
It depends on what the exchage ratio is. Usually the bigger company won't like to have it's shares diluted so will fix an exchange ratio like 1:1.32 like it happened in the case of AT&T acquiring Bell South recently. The closer the price of the Acquiree with that of the Acquirer the ratio will be equal other wise it will be larger like 1:4. All this is true is the acquirer resorts to stock swaps acquisition or exchnage of shares acquisition.
If it is all cash acquisition then the tactics is different where you will get a price for your share from the acquirer.
Then there is LBO or leveraged buy out.
For the last part of your question usually the stock you get has the price of your number of shares reliquished so doesn't matter whether it goes up or down. It is the experience that the price of your share will move up a few points higher on announcement of the merger and exchange ratio usually will get you a premium.
2007-01-11 03:20:40 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
I think there are many ways this can go down. One way for sure is as follows, this happened to my company that i work for.
My parent company wanted to by a company that was trading at $28 per share. When the announcement was made about the buy, the parent company basically stated that they were buying the majority share holders shares for $78 per share. Then in one year they would buy any outstanding shares for the same. If no one wanted to sell, then the following year the stock would be traded 1 for 1 to the new company. The stock went to $65 over night, and now the stock is no longer traded.
2007-01-10 13:35:19 · answer #3 · answered by no_name 2 · 0⤊ 0⤋
Assuming that you received shares of the acquiring company in exchange for your shares of the acquired company, yes.
2007-01-10 10:32:11 · answer #4 · answered by HandyDan 3 · 0⤊ 0⤋
No.
2007-01-10 10:38:47 · answer #5 · answered by Anonymous · 0⤊ 1⤋