If a stock is going to be bought by another company...?

Question

If a stock is going to be bought by another company or private equity group at lets just say $50 a share but the share price is $40 a share at the start, If a bought the share a few days after the news at $45 a share will I still make a $5 profit if the deal went through?

Answer 1

yes of course. the buyer is there. but this assuming existing investors don't sell so much on that news though.

Answer 2

Well you will make whatever the tender price is and it will be paid on the date specified. There are two good reasons that the stock will never mirror the offer price dollar for dollar.
First there is always the chance that the deal will fall though and then the price will go back to at least $40 and maybe less so you are assuming that risk. Secondly there is the time value of money. You invest your $45 and the deal closes in 3 months so you have the interest value until it closes, in this case at 5% about $.50 per share.

Answer 3

Yes, you will make $5 if the deal goes through. The price is probably going to lag the deal price a little, because there's no incentive to bid it any higher. If it lags by quite a bit there is probably doubt the deal will go through. If the price exceeds the deal price then investors may think the stock is worth more and may expect other buyers to emerge.

Answer 4

it depends on how the buyer wants to handle it. Some give cash per others roll it into a new stock. Other even allow the acquiring stock to split.

But based on your scenario above yes you make at least $5 a share profit brokers will not charge a fee when stocks sawp like this

Answer 5

if the deal goes through, ya

on the other hand, that the price only goes to 45 after a few days pretty much suggests that there is reason to doubt the sale will go through. otherwise the price would be 49.87


oh

Answer 6

Yes, if you sell your shares to the purchasing company.

Answer 7

Yes.

But the price would go up to 50.