I'm a bit confused

Discussion in 'Share Investing Strategies, Theories & Education' started by Tizzy, 30th Oct, 2008.

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  1. Tizzy

    Tizzy Well-Known Member

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    I'm way out of my depth when it comes to shares but I wondered if someone here could clear this confusion up for me.

    If I own shares worth say, 50 cents each and then a big company ( where the shares are worth ten times mine) comes and takes over the company that I have shares in, what happens to the value of my shares?

    Thanks for taking the time to enlighten me :eek:
     
    Tizzy, 30th Oct, 2008
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    It depends on how they choose to purchase your shares.

    Some takeovers will pay cash (you'll get $X cash for every share you own).

    Some will pay via shares (you'll get $Y shares in the new company for every share you hold in the current company - in your example, if you had 10,000 shares in company A, you'd probably get something like 1,000 shares of company B ... but it depends on the purchase offer)

    Some will pay via a combination or some other more complicated method.
     
    Simon Hampel, 30th Oct, 2008
    #2
  3. Tizzy

    Tizzy Well-Known Member

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    Perth WA
    Thanks for that information Sim. Sounds a bit complicated actually and sounds like the shareholder has very little power at all.

    I'd be distressed if I paid a lot for shares and the price fell substantially and then there was a takeover. You wouldn't get very much back. But then, if the takeover was a positive move, maybe your investment would grow.
     
    Tizzy, 30th Oct, 2008
    #3
  4. AsxBroker

    AsxBroker Well-Known Member

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    Hi Tizzy,

    There is usually a premium of around 30% if a takeover is announced.
    Though obviously depending on how much the shares dropped by this may not cover your initial outlay...

    Cheers,

    Dan
     
    AsxBroker, 30th Oct, 2008
    #4
  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    Takeovers are often rumoured for weeks or months in advance. This can affect the share price well before any formal offer is made.
     
    Simon Hampel, 30th Oct, 2008
    #5
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