When a deal like Microsoft buying Activision goes through, does the money that the company is paying go to the company being bought? Does it go to the shareholders? Does the Activision stock just go away?
The reason I am confused is, if Microsoft gives Activision billions of dollars, at the end of the day, isn’t Microsoft effectively giving themself billions of dollars?
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I’m using Microsoft and Activision as an example, but I am curious about how this works in general.
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You are on the right track with your initial assumptions. The details is specified in the contract and can vary quite a bit. But in general Microsoft will be paying the shareholders and the stock will just go away as they are now all owned by Microsoft. This is a very common thing to do.
In some cases though the buyer does not actually have all the money in cash. The shareholders might then be convinced to accept stock in the company as compensation. In your example that would mean that Activision shares would be traded for Microsoft shares. It is also possible for the buyer to take up a loan to get the cash and then this loan can be transferred to the company that got bought. This is what Musk did with Twitter which caused Twitter itself to lose 44 billion dollars ending up in massive debt and with huge interest payments.
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