Pardon my novice question

What happens to the stock price/prices of companies in the event of a merger?

Company A = trading at $1/share market cap=5

Company B =trading at $5/share market cap=7

So B which is (5*1.07) - A (1*1.05) = 4.3

creates company C which is trading at 4.3 with at cap of 12..

am I looking at this right or am I way off?

Wht would happen to the common stock holder, say if you had a 100 shares of company A?

Any feedback would be much appreciated!!

Warm Regards,
John

 

*bump*

 

I don't know the exact numbers, but the common gets f*ked every time.

 

*bump*

 

Anyone? Bueller?

*crickets*

 

Is this a stock for stock merger or a cash deal?

 

No, even in the simplest deal with pure stock swap, this won't be the price. After all, a portfolio of two stocks carries different risk than the sum of its parts.

In an actual real life merger, there are tax assets/liabilities to consider, asset sales, debt issuances, etc... so the ending equity value is quite complicated to derive.

Short answer, the post-merger company stock price is where the post-merger company trades post merger.

 

You might try Google ... here's one answer:

Motley Fool

 

Thanks for all your help guys. I really appreciate all the responses and all the help you guys have been along the way.

Cheers,