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

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?

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This entry was posted on Wednesday, January 20th, 2010 at 9:34 pm and is filed under Corporations. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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

  1. 60187guy Says:
    January 22nd, 2010 at 10:31 pm

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

  2. Al in NC Says:
    January 25th, 2010 at 9:54 pm

    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.