There is this story how Microsoft wanted/wants to buy Nintendo but was laughed out of the room. Is nintendo not a stock company? Couldnt Microsoft just buy 51% of all the shares? From what Ive seen the biggest shareholder is a japanese bank with 17%. Its not like somebody already owns the half.
In: 1530
Well, in order to buy, someone has to be willing to sell. So Microsoft can indeed just start buying Nintendo stock on the stock exchange. However, this will cause the price to increase, since Microsoft would have to make the highest bid to purchase the stock. When others see this increase in price, you will likely see other investors hopping on and also buying some stock in hopes that the price goes further up. Now Microsoft again needs to increase the purchase price, again pulling in more traders, pushing the price further and further up in a vicious cycle.
And even if you outcompete everyone, perhaps you only manage to buy 38% because there just wasn’t enough stock available on the active market, the rest is maybe just sitting in the portfolios of banks and other investors who are keeping it longterm regardless of the price. So now you still failed to gain a majority and you are back to the starting square.
That’s why it’s more beneficial to make an acquisition agreement directly with the company, to avoid paying a lot of extra due to market fluctuations and to make sure you actually get the required amount of stock.
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