How do company buyouts affect buy/sell decisions?

Discussion in 'Trading' started by gmb1994, Jun 25, 2005.

  1. gmb1994


    Maybe some of you can help me understand how this works.

    I currently hold shares of stock in Neiman Marcus. A few months ago, Neiman Marcus was bought out at $100/share. I owned the shares prior to the sale. Right now, Neiman's stock is hovering around $96/share. The sale still needs approval from the SEC and, if all goes well, Neiman's claims that the sale will be approved in August or September of this year. After the approval, I guess the new owners will offer to buyback shares of stock at $100/share. Am I understanding this correctly? Here are my questions:

    1) Since the sale was for $100/share, does this mean that it's unlikely for the price/share to rise above that before the buyback period?

    2) How likely is it for the price to rise above $100 before the buyback period? Any ideas on what typically happens to the price/share after the buyback period? I've heard lots of conflicting information in regard to this -- some say to sell now, others say to stay in. What are the reasons for these suggestions?

    3) What should I be concerned about if I hold on to the shares, both before, during and after the buyback period?

    4) Am I obligated to sell my shares at $100/share or can I hang on to them at market value after the buyback period? How does this work?

    5) What would you do if you were in this situation?

    If these questions have already been answered, please direct me to those answers.
  2. Funny ... You made fun of my thread but yours isnt much better,

    Like others said to me try search..:p
  3. Htrader

    Htrader Guest

    1. it will rise above 100 only if other bidders come in

    2. Very unlikely that other bidders will come in since the original bid was determined by auction, so others have already had their chance. Plus the bid is seen as rather expensive.

    3. Your only concern is if the bid somehow falls through. This can happen if the bidding consortium fails to line up financing, government regulators object to the deal, or if neiman suddenly announces surprising negative news that makes the bidders back out

    4. Yes, if the bid becomes finalized and approved by the majority of the shareholders you will get bought out at the whatever the final price is. You have no other option.

    5. If I were you, I would sell and lock in your gains. At current prices you have only about a $3.5 upside. The deal is expected to close in november, so its less than a 10% annualized return on your money. Personally, I would feel better sleeping at night knowing that I didn't have to worry about the deal falling through.
  4. gmb1994


    Don't take offense Coupon ... I'm only having fun with the other posts, NOT making fun of yours. This business we're in is often very stressful and it's good to have a little fun sometimes.

    Anyway, if I could have answered your question I would have.
  5. gmb1994


    Thank you very much, Htrader ... that helps a lot.

    Two years ago many of my relatives said to get out. I'm glad I stayed in.