What Do Investors Need to Know? Buyouts may be a
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Posted On: 05/23/2019 9:05:43 AM
What Do Investors Need to Know?
Buyouts may be a good thing for shareholders of a public company. Buyout offers often send company shares upward as would-be buyers must often offer a premium to entice shareholders to sell.
On the downside, when public shareholders sell their shares, they no longer get to participate in any future gains. Moreover, if the deal price is below what you paid for your shares, the buyout would lock in your losses, with no opportunity to ride it out and wait for additional gains.
If you own shares in a takeover target, you should weigh the offers carefully. You want to determine if you are being offered a fair price. If it is managers who are making a bid to take the company private, look to see if an independent committee has been set up to weigh offers.
“Did independent directors look at this carefully?” Gordon said. “Did they hire their own investment bankers?”
Keep in mind, your power as an individual investor might be limited. If a buyer gets a majority of shareholders to accept an offer, you could be forced to sell your shares at the agreed upon price.
Investors who are not shareholders of a public company might hear rumors that the company is being taking private. That might give them an incentive to jump on a stock. But many takeover rumors never pan out. When thinking about buying any stock, you should always take into account your own financial situation, and the overall prospects for the company and avoid investing on rumor.
https://www.finra.org/investors/what-happens-...go-private
Buyouts may be a good thing for shareholders of a public company. Buyout offers often send company shares upward as would-be buyers must often offer a premium to entice shareholders to sell.
On the downside, when public shareholders sell their shares, they no longer get to participate in any future gains. Moreover, if the deal price is below what you paid for your shares, the buyout would lock in your losses, with no opportunity to ride it out and wait for additional gains.
If you own shares in a takeover target, you should weigh the offers carefully. You want to determine if you are being offered a fair price. If it is managers who are making a bid to take the company private, look to see if an independent committee has been set up to weigh offers.
“Did independent directors look at this carefully?” Gordon said. “Did they hire their own investment bankers?”
Keep in mind, your power as an individual investor might be limited. If a buyer gets a majority of shareholders to accept an offer, you could be forced to sell your shares at the agreed upon price.
Investors who are not shareholders of a public company might hear rumors that the company is being taking private. That might give them an incentive to jump on a stock. But many takeover rumors never pan out. When thinking about buying any stock, you should always take into account your own financial situation, and the overall prospects for the company and avoid investing on rumor.
https://www.finra.org/investors/what-happens-...go-private
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