Comments on: What happens to a company’s stock if they are bought out?

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By: Sniper Forex

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By: Forex

Forex — Sat, 14 Aug 2010 07:54:48 +0000

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By: Lori

Lori — Thu, 01 Apr 2010 15:30:27 +0000

My mother in law worked for a company back in the 70’s called Walden telephone and then it was bought out by another company,Highland telephone, a few years later and then bought out again 2 other companies and now is called Frontier Communications, which is a billion dollar company. She had a or stock in that company, now that she is passed on, her son contacted this compnay and has sent papers saying he will be reeciving a large sum of money from this stock, what kind of amount would he possibly be looking at? Should he roll it over to the existing business? This has been on going since January.

By: sergik12

sergik12 — Thu, 28 May 2009 19:13:36 +0000

The stock becomes worthless. You lose your investment.

By: dee

dee — Thu, 28 May 2009 19:00:17 +0000

What will happen with GM stock holders, if they go bankrupt ?

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Fri, 03 Oct 2008 12:52:57 +0000

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By: vadim.vintsevsky

vadim.vintsevsky — Thu, 06 Mar 2008 20:50:02 +0000

i feel tha this acquistion will be great for both microsoft and yahoo. Yahoo who before would not be able to compete with the powerhouse that is good, now has the resources to do so. And microsoft now is going into googles game, which has a ton of money in it. Also I feel that microsofts shares would not go down to much if they do end up aquiring because they are using their obscene amount of cash. Mircosoft has always just had a ton of cash doing nothing, since they are just using that to get yahoo, not releasing debt, it is a great investment. However yahoo is trying to fight it with all their might so who know if it will ever go through.

By: RomVay83

RomVay83 — Sat, 16 Feb 2008 20:52:13 +0000

This is not an exact science and exceptions do happen, however, the general rule of thumb is the acquiring company’s stock price falls, while the acquired company’s stock price rises. You can dedicate a text book to the methodology behind this but here is the skinny:

When a company is acquired, the general public view is positive. And why not? The acquired company now has a far-greater pool of resources such as funding, expertise, etc. If the company was not doing so well, the acquisition will most likely mean a complete reorganization of management and other company processes (think of it as a makeover). All of this points to greener grass and a better bottom line in the future.

On the other hand, the acquiring company just spent a large sum of its cash on the purchase. In many cases, companies will borrow and use other means of generating the funds needed to make the purchase. This would have made significant changes to many key ratios. Furthermore, the company now has a major task ahead of it. In many cases there are significant overlaps in personnel and layoffs must be made, which are magnets for lawsuits. Further integration of systems and personnel must be made. All of these are expensive steps to take. Also, do not forget the acquiring company inherits any liabilities the purchased company may have.

The last thing to note is that there is method to what may seem as madness behind all acquisitions. The acquiring company has done its analysis of the purchase and may believe that the benefits outweigh (or will eventually outweigh) any negatives. While its stock price may take an immediate hit, it will climb back up and beyond in the long run if all works out as planned. Whether that happens or not is always debatable.