Pardon my novice question

Discussion in 'Stocks' started by Darshan, Mar 20, 2009.

  1. Darshan


    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,
  2. Darshan


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


  5. Darshan


    Anyone? Bueller?


  6. Is this a stock for stock merger or a cash deal?
  7. sjfan


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

    Motley Fool
  9. Darshan


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