What happens to stock in a company that gets acquired by another company? (fund, trading)

[Robert Frost]

The scenario I am presenting seems unlikely, but let's use t as an example.

Take Nintendo STock. At around $23,000 a share, it's one of the most expensive on the market.

After being dominant in the gaming market from the mid 1980s and throughout the 90s, it has largely lagged behind in the market lately. (If South Park didn't even mention the company just to make fun of it in the "Console Wars" trilogy, then you KNOW they've seen better days )

For that reason, figure Nintendo gets acquired by Sony which has the Playstation or Microsoft which has the Xbox.

What happens to someone who owns shares in Nintendo?

Are they screwed?

[jghorton]

The outstanding stock of a public traded company represents an ownership share or interest in the company. When a company buys-out a publicly traded company, they typically do so by paying ##$ per share or giving ## shares for each of the existing shares. The stockholders of record are compensated in that amount.

Sometimes when a company goes 'belly-up', the value of the common stock can pretty much be lost (or reduce to pennies on the dollar). Preferred stock holders tend to fare a little better.

[flyonpa]

Depends on the deal, You would get paid cash for your Nintendo stock, or would get Sony, or Microsoft Stock.

If you had 1 share of TYO @ 23,615.00 You would get 819 shares of sony @ 28.80 (and some cash for the fractions of shares) or 446 of Microsoft @ 52.87 + some change.

[Big-Bucks]

What happens? It can become a tax headache trying to figure out cost basis one day. Back when I used to buy individual stocks I learned to sell BEFORE spin offs and buy outs. These days I don't have to worry about this stuff because I just buy index funds.

[JRR]

I usually sell on the news of a company that I own being acquired instead of waiting for the actual closing. The trading price usually comes up close to the acquisition price and instead of waiting for months, I sell and use the money elsewhere.

An example would be PBY today. It is being acquired by Bridgestone for $15 and looks to open up somewhere around $14.90. My thoughts would be that it is not not worth waiting for that extra 10 cents or so.

The caveat is that every now and then, the buyout price can be raised by another purchaser and by selling right way, you would miss out on the better price. But also, sometimes deals don't go through and the stock price goes back down, so by selling right away, you don't ride it back down.