What happens to the stock when a big company buys a little company?

January 26th, 2010 | by admin |
Chris asked:


Does the little company stock swap for big company stock? Does the big company stock go up? I know of a small company rumored to being purchased soon by a big company. Which one should I buy stock in ahead of time?

  1. 2 Responses to “What happens to the stock when a big company buys a little company?”

  2. By 60187guy on Jan 29, 2010 | Reply

    Generally, you would want to buy the stock of the “little” company, the one being acquired.

  3. By Al in NC on Jan 31, 2010 | Reply

    The shareholders of the smaller company may be offered by the larger company:

    1) A certain amount of cash per share (normally higher than the price at which the stock was previously trading at BEFORE the purchase of the company was announced.

    OR

    2) A certain number of shares in the larger company in exchange for a certain number of shares of the smaller company.

    The stock price of the larger company may actually go down some when the deal is announced.

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