Stock Trading Question

[jdk]

Anyone know about the stock market who has a second to PM me. I have a small question to ask regarding purchasing stocks of a company who is going to be bought out in the future. Is it worth it? What will happen to the shares I purchase now? Will they turn into shares of the company who buys them out and at what price?

 

[blindchild]

Stock Market is just a game. Its about a luck or a not. It all depends if the market gets high or low. Let me explain properly:

For example:
You purchase 1000 PSO Shares.

6 $ for each = 6 x 1000 = 6000 $ you pay.

That share rises the next day to 8 and you sell it because you think this wont go more up due to the bomb blasts and so.

8 x 1000 = 8000 $ you earn.

2000 $ is your profit. If you will keep hold of it, you will make some loss daily.

Again thats what i am saying, its just a game with your luck.

 

[NameYourself]

its just a game with your luck.

Try telling that to Warren Buffet!

 

[jdk]

Thanks for the run down, but this did not answer my question at all. Say I purchase company A stock. In a year company B buys them out. What happens to the stock I have for company A? They should turn into shares of company B correct? If so at company B's current price?

Stock Market is just a game. Its about a luck or a not. It all depends if the market gets high or low. Let me explain properly:

For example:
You purchase 1000 PSO Shares.

6 $ for each = 6 x 1000 = 6000 $ you pay.

That share rises the next day to 8 and you sell it because you think this wont go more up due to the bomb blasts and so.

8 x 1000 = 8000 $ you earn.

2000 $ is your profit. If you will keep hold of it, you will make some loss daily.

Again thats what i am saying, its just a game with your luck.

 

[NameYourself]

From what I've heard when a company gets bought out, you usually get some $ for it on a per-share basis from the company doing the buy out. If people have poor expectations for the new company, then obviously stock will go down. The few examples I've heard of though were cases in which the stockholders benefited from the buyout. hth - NameYourself

 

[DNjet]

Company A stock will stay in place but with a different financial structuring behind it after the buyout , for better or for worse, usually for the better. They usually would not buy it if it can't be an asset to their structure. Company A will simply become a holding of Company B.

 

[blindchild]

NameYourself is absolutely correct.

Heres my point:
You buy Company A's 1500 stocks, they value 5 $ each.
You get a offer from company B for 7 $ each.

Then you have to think and see the market level whether its down or not.
If you think the market will go down in the future, you will sell it to company B.

If you do not think the market will go in the future, you wont sell it and will keep it until someone gives you another big offer.

NOTE: THEY CANT BE turned into company B unless or until you accept their offer.

 

[jdk]

Say for example Company A is worth under $1 and Company B is worth $30. Company B buys out Company A and I have 5,000 shares at the < $1 price. What turnout would you predict I would expect from the buyout?

 

[DNjet]

The Company B's current trading price would not have any effect at all on the company A's trading price after the buyout , its price will reflect what the market thinks is NOW the future of Company A as a newly managed company after the buyout , new financial structure..how company A fits into the structure of company B's future ...etc...etc...

 

[blindchild]

It all depends on what is happening in the world. If there are peace talks going on ofcourse it will rise.

Plus like if the other company has 30 $ worth, the company A will also rise due to the name of Company B.

Hope this is clear.

Share Market and Stock trading market depends on what is happening too.

 

[jdk]

Company A is being bought and the two companies will merge into Company B. Therefore, one stock. Company A will not have stock under the old company name anymore correct?

Say for example Google (~$300/share) bought Microsoft (~$30/share). I have 5,000 shares of Microsoft (5,000 x $30/share = $150,000. Will they just give me $150,000 worth of shares of Google ($150,000/$300 = 500 shares) or will my $5,000 shares of Microsoft go up to $300/share? It would be strange for them to turn into 5,000 shares of Google (hence Microsoft name no longer exists since Google bought (ate ) them up. So you can not still say I own Microsoft stock. I am looking to purchase into a company in the process of being bought out and in my logic of thinking it would be good to buy the stock, but I am unsure if I will benefit from it or not.

It all depends on what is happening in the world. If there are peace talks going on ofcourse it will rise.

Plus like if the other company has 30 $ worth, the company A will also rise due to the name of Company B.

Hope this is clear.

Share Market and Stock trading market depends on what is happening too.

I see your point, but please read my new analogy above. I do not think I was clear before when I was explaining the situation. I know how the stock market works, but don't know what happens when one company buys out another.

 

[DNjet]

In your last post you are talking about a merger and not a buyout, different things altogether.

In the case you have described now , then the stock of company A would reflect the offering price from company B , if the stock is at $5 now , they might offer $7 , so thats where you would wind up. The current stock price of the parent compony could be $100 , that would have no effect on it.

 

[jdk]

So it is whatever they offer per share to buy out the other company. Would they send me the $7/share or give me shares of the buyer's company?

 

[JEsports]

When company A aquires company B, A must pay either cash or stock
(its own stock) to company B. In the case of cash, B holders receive a
check and their stock is "dead". In the case of a stock acquisition, B
holders receive shares of A according to a set ratio (i.e. two shares
of A for every share of B).

 

[DNjet]

Most of the time it is in stock.

 

[Poker]

regarding purchasing stocks of a company who is going to be bought out in the future. Is it worth it?

Buyouts are a risky proposition. If this one transaction is going to be the extent to your involvemt in the markets than you may want to go ahead but using only a small amount of your risk capital (10% or less). Remember that the deal can fall through at any time and that rumors are just that, rumors, until the deal is actually done.

 

[blindchild]

Yeah JDK, your post seems different on both cases. For your last question, If Company B buys Company A , either they will give you an offer or they will shift you to Company B. If they do not do this, their shares will be dropped by atleast 25 %.

Any more information, feel free to post here, I used to do this before i started in this,
Thats like years back. I invested around 20,000 $ , it was a very risky business, it used to drop and up. But i had my luck along so i had earned almost triple the amount after investing that.

It all matters with your decision and your thinking.

 

[greggish]

I'm still kicking myself. I was going to buy 5000 shares of MIX 2 months ago when it dropped down to $3 after the Spitzer Spyware lawsuit. I talked myself out of it though. I didn't think they would be bought out so quickly... and for $12/share. I outsmarted myself out of $40,000+ profit in just 2 months time.

 

[jdk]

Thanks for all the replies. I will weigh the answers and decide what I want to do.

 

[blindchild]

If you are thinking to invest in stock market, get to learn about stocks first. Dont invest like 70,000 $ on this. Slowly and slowly, start with 1000 $. This will make you learn more and about all the stuff this requires.

It requires:
Time
Concentration
Right decisions.