What happens when a private company merges into a public company already trading on an exchange? Are the existing shareholders shares of stock worth anything, and if they are, what is the value of the existing shares? Ex: If "ABC" company is trading on an exchange and is a "clean shell", what is the value of the shares after they merge with "XYZ" company? Do the existing shareholders get bought out or are they allowed to keep their shares and just roll over into the new company with a new name. Who sets the new price for the shares to be traded under the new name?
2007-07-19 10:51:43 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
What happens depends on the terms of merger. Existing shareholders either get bought out, or are given shares in the acquiring company (the conversion ratio is agreed upon during merger negotiations), or a combination of the two.
2007-07-19 13:49:20 · answer #1 · answered by NC 7 · 2⤊ 0⤋
In a reverse merger with a shell, the value that ABC brings to the table is liquidity and access to more financing. The price of stock is determined by the market but the new stock is valued based on XYZ's underlying business. Everything else is stupilated in the merger agreement filed with the SEC.
2007-07-19 14:06:02 · answer #2 · answered by Anonymous · 1⤊ 0⤋