A cash buyout agreement has been announced for a stock I own, but why isn't my stock trading at a per-share price equal to the buyout price?

When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. In general, the acquiring company's stock will fall while the target company's stock will rise. The reason the target company's stock usually goes up is that the acquiring company typically has to pay a premium for the acquisition: The acquiring company's stock usually goes down for a number of reasons.

First, as we mentioned above, the acquiring company must pay more than the target company currently is worth to make the deal go through. Beyond that, there are often a number of uncertainties involved with acquisitions. Here are some of the problems the takeover company could face during an acquisition:.

Error (Forbidden)

We should emphasize that what we've discussed here does not touch on the long-term value of the acquiring company's stock. If an acquisition goes smoothly, it will obviously be good for the acquiring company in the long run. To learn more about this subject, check out The Basics of Mergers and Acquisitions. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education.

What happens to the stock prices of two companies involved in an acquisition? By Investopedia Staff Share. Here are some of the problems the takeover company could face during an acquisition: A turbulent integration process - problems associated with integrating different workplace cultures Lost productivity because of management power struggles Additional debt or expenses that must be incurred to make the purchase Accounting issues that weaken the takeover company's financial position, including restructuring charges and goodwill We should emphasize that what we've discussed here does not touch on the long-term value of the acquiring company's stock.

What Happens to a Stock When a Company Is Bought Out? | dakoxok.web.fc2.com

Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, Learn about the difference between mergers and acquisitions.

Discover what factors may encourage a company to merge or acquire A tuck-in acquisition, often referred to as a "bolt-on acquisition", is a type of acquisition in which the acquiring company Evaluate whether a company is a good acquisition candidate by analyzing its price, debt load, litigation and financial statements. How a company pays in a merger or acquisition can reveal a lot about the buyer and seller.

We tell you what to look for. A takeover happens when one company makes a bid to acquire a target company.

Making a windfall from a stock that attracts a takeover bid is an alluring proposition. The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic information In corporate terms, an acquisition is the purchase of a company or the division of a company.

Some acquisitions are paid in cash, while others are paid with a combination of cash and the acquiring Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.

These deals can make or break investors' returns. Find out how to tell the difference. A merger is a combination of two companies to form a new company, An acquisition that will increase the acquiring company's earnings An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable.

In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation.

A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.