Question for you Brokers

K9Torro · 10-17-2008, 12:27 PM

Hello everyone,

I have a quick question that I hope someone can answer for me.

If Company A stock is selling for $4.00 a share and they merge with Company B whose stock is selling for $40.00 a share, what will the status of the Company A stock be after the merger will it automatically become Company A/B at a higher rate or what happens.

Thanks in advance,

Todd

jyl · jyl's Garage

Not a broker, but - Answer is, there is no general answer. Depends on how the transaction is structured - cash or stock.

Cash - Company B could buy Company A's shares for $6.00/sh cash. In which case post-merger, a former owner of 1 share in Company A simply has $6.00.

Stock - Company B could exchange 0.2 Company B shares for every 1 Company A shares. In which case post-merger, a former owner of 1 share in Company A now has 0.2 Company B shares, which is worth 0.2 x whatever Company B shares are trading at. $8 if Company B's shares are still $40, but that's not guaranteed.

Cash plus stock - can have some combination of the above.

You have to read the details of the deal, which will usually be in the press release.

competentone · 10-18-2008, 08:55 AM

Quote:

Originally Posted by jyl

Not a broker, but - Answer is, there is no general answer. Depends on how the transaction is structured - cash or stock.

Cash - Company B could buy Company A's shares for $6.00/sh cash. In which case post-merger, a former owner of 1 share in Company A simply has $6.00.

Stock - Company B could exchange 0.2 Company B shares for every 1 Company A shares. In which case post-merger, a former owner of 1 share in Company A now has 0.2 Company B shares, which is worth 0.2 x whatever Company B shares are trading at. $8 if Company B's shares are still $40, but that's not guaranteed.

Cash plus stock - can have some combination of the above.

You have to read the details of the deal, which will usually be in the press release.

(Not a broker either.)

"jyl" pretty much answers it. I would just add that if you didn't find the details in any press release the company does, the details will be in the companies' SEC (Securities and Exchange Commission) filings -- if the company is publicly traded.

I actually find it easier to review SEC filings using this site rather than going directly to the SEC's site:

http://www.pinksheets.com/pink/index.jsp

Enter the company's symbol, then click on the "Filings" tab to see the latest SEC filings, or any historical filing.