How does a public company go private? Don’t they have to convince all shareholders to sell back their shares?
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The board, which represents all of the shareholders, is empowered to make decisions on behalf of all of the shareholders, including selling the company (and consequently, the shares even of individuals who don’t want to sell).
They only have to get 51% of the stock back to decide that they will pay the rest of the people the highest price they paid. You are losing your stock, when the company goes private. You could go to court, and perhaps get more, but it’s unlikely.
There is a threshold for the % of shares to be owned by a majority shareholder before they can force minority shareholders into selling.
This may be detailed in the company’s articles of association or in the relevant law for that country.
But in short they need to gain sufficient shares in the company, either by buying those on the open market or buy convincing existing investors to sell their large stake.
Normally these offers to buy shares are above the stock price the company was trading at before the takeover started so the minority is still getting a reasonable deal, just less than they feel the company is worth.
For any decision you never have to convince *all* the shareholders, just a majority of ones. So shareholders will either agree with privatization, in which case they are already convinced, or they disagree, in which case they are a dissenting shareholder and therefore will typically have the option to sell anyway and leave the company.
Typically in a situations where a company is being taken private, the amount paid to shareholders is a premium of 20-40% over the current market value of their shares, so there’s not a lot of convincing that has to be done for a good portion of shareholders. The acquiring entity usually leverages the buyout and then uses the target company’s cash flow to service the resulting debt.
There are laws in some places or often rules in the shareholder agreement that if one or groups own x% of the company then the rest of the shareholder has to sell to a fair market price.
So there is in most cases not a requirement to purchase all of the shares you just need enough of them. It can be that you need a vote from a majority of the voting shareholder to accept a bid like that. Because you can have different share classes with different amounts of votes where class A share might have 10x the votes of a class B share. So a majority of votes is not the same as owning a majority of the shares.
Being public, the shares are traded openly on a registered stock exchange (listed), and the company has little or no control over who can buy or sell the shares. Being private, the shares are traded in private deals, although typically there are far fewer trades if any.
Most regulated exchanges have rules about ownership and trading. For example, if a purchase of shares takes you above 25% you might be required to offer the same price to all remaining shareholders, they are not obliged to sell, but you must be able to buy those that want to sell. There might also be a rule that if you reach 90% or 95% you can buy out all remaining shareholders at the market price.
But ultimately the decision to be public or private is one made by all the shareholders, so if you can persuade them to **delist from the exchange**, you can take the company private with many shareholders or just a few. And it is this delisting that makes the difference between public or private.
It’s in the local listing rules. Above a certain level of purchases the acquirer can force the sale by remaining shareholders. This is called a squeeze out. Usually the offer will remain open long enough to reach that mandatory threshold then a mandatory offer is extended to remaining shareholders. Rules and thresholds differ per exchange. For instance it used to en much more challenging and expensive to buy out remaining shareholders in Germany than in Britain.
https://en.m.wikipedia.org/wiki/Squeeze-out
Typically the acquirer will arrange for the target to merge with a subsidiary. Under state corporate law, the merger agreement can provide that shareholders of the target get cash instead of shares in the subsidiary. The target shareholders have to vote to approve the merger, but holdouts don’t have the choice to hang on to their shares.
Same way that a company get acquired by another company… they get 50%+1 shareholders to agree to the offer, at which point all shareholder must exchange their shares for the agreed upon payment.
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