Holding stock in a company that gets bought out? | TigerDroppings.com

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xXLSUXx
New Orleans Saints Fan
New Orleans, LA
Member since Oct 2010
8423 posts

Holding stock in a company that gets bought out?



Anyone have experience with this? I know it depends on the term of the buyout, but just wondering if anyone has invested money in a smaller company that has gotten bought out by a much larger one.


Thanks.


My investing terminology/knowledge is pretty limited so simple or detailed explanations would be appreciated.



This post was edited on 10/26 at 9:48 am



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Gujam8
Member since Jun 2010
2361 posts

re: Holding stock in a company that gets bought out?


Ya, you get shares in the new company depending on the conversion ratio detailed in the buyout agreement. It's rarely 1:1 swap though. The brokerage house holding your shares of the old company will pretty handle this,but do note the cost basis of the new shares in case you want to sell them in the future.


This post was edited on 10/26 at 10:06 am


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tigerrocket
LSU Fan
Member since Aug 2008
90 posts

re: Holding stock in a company that gets bought out?


It depends if the deal is for cash, stock, or a combination. If it's all cash and the stock is trading at or near the cash offer, you can sell it and move on. If the deal is for stock of the new company, make sure you want to own the new company. If you don't, you can sell your shares now or after conversion.

One unknown is whether or not there is another company that will make a higher offer for the stock.

If the deal is for cash, it is usually a taxable event. If it is for shares of the new company, it usually is not a taxable event until you sell.






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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
82992 posts

re: Holding stock in a company that gets bought out?


quote:

Holding stock in a company that gets bought out?
Anyone have experience with this?

Yes, many times.

Do you have specific questions you would like answered about it?






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CHSBears
Texas A&M Fan
Baton Rouge
Member since Aug 2007
522 posts
 Online 

re: Holding stock in a company that gets bought out?


In rare cases could result in minority interest in a privately held corp, i.e. Baton Rouge Water. When Baton Rouge Water went from public to private, I believe around 100 common and preferred stock holders did not sell to the new entity taking it private. Thru deaths it is down to around 35 left.





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