What happens to the stock of the company who is bought by another publicly traded company.
Here is an example. If a company buys Twitter what happens to the stocks of the people who are holding twitter stock?
I assume if the buying company leaves twitter alone nothing, but if they absorb it and make it a part of their existing company, then what?
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This depends on how the acquisition and merger is done. In order to merge two companies together you need permission from the shareholders. Depending on the company charter you need either 1/2 or 2/3 of shares to agree to this deal, the rest is forced into it. However the rest can not be discriminated against and needs to get the exact same deal as those who agree. All shareholders are treated equal. In some cases the shareholders get paid in cash. This is not so much different from normal dividend or buyback but it is large enough that the shares are worthless afterwards. In other cases however there is not enough cash to pay all the shareholders and the company end up buying the other company using their own shares. If this happens then the people who own a stock in a company might find themselves owning stock in the merged company instead. In none of these circumstances will you end up with a single shareholder being able to hold out and prevent the deal from going through or some shareholders not getting fair compensation for their shares.
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It depends on the specifics of the deal, but usually either the shareholders get the cash amount for the deal or they get shares of the acquiring company based on value. It happens when the deal closes, which can be months after deal is announced.
if it’s a cash deal, one day you’ll no longer see the shares in your brokerage account and you’ll see the cash in your cash balance.
If it was a stock deal and the acquiring company stock is $100/sh and the company being acquired is $50/sh you’d get half as many shares (same total value)
How they operate the company has no difference on how the acquisition takes place… if they buy the company, the shares go away. Even if, say Apple, bought Twitter and operated them as a separate division they’d still pay out Twitter shareholders for the shares to acquire the company.
Usually you
1. Get paid out based on the acquisition offer
2. Get stock in the new company based on the new value.
So if Disney bought Twitter for a 20% markup you would either automatically get a payout for 120% of the stocks value or get Disney stock usually they give a ratio they will pay out.
Like the acquisition might say you will get 1 Disney stock for every 4 Twitter shares you owned.
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