3

I hold shares in the publicly traded company I work for. This company is now being acquired via a cash merger by a second company.

They put out a press release expressing their intent to buy all outstanding shares at a 44% percent premium. Subsequently, the stock price of my shares has gone up by roughly 40% but the merger has not yet been approved by the authorities.

My question: Do I have to proactively sell my shares now / after the merger has been approved? Or is the transaction handled by my broker automatically after the second company bought 90% of the outstanding shares and the remaining shares will no longer be able to be traded. I'm asking because selling would incur a fee at my broker and I'd like to take the offer of the 44% premium instead of selling at market price now.

Improve this question
11
  • What do you think will happen to share price if the merger isn't approved by the authorities?
    – Bob Baerker
    Mar 15, 2019 at 12:42
  • it will crash down to the original price or a little lower than that. I'm certain that the merger will go through though since the buyer already purchased around 45% and the target is too small for cartel worries. The buyer already has a track record of more than 100 successful mergers
    – buddybubble
    Mar 15, 2019 at 12:49
  • If you're certain that the merger will go through then you have no worries.
    – Bob Baerker
    Mar 15, 2019 at 13:03
  • 1
    If you believe that the deal is going to go through and the buyer will acquire all outstanding shares at a 44% percent premium then there's nothing to do.
    – Bob Baerker
    Mar 15, 2019 at 13:14
  • 2
    @RonJohn: only if you hold the shares directly (i.e. are registered with the transfer agent or registrar). If you hold the shares in a brokerage account (also called 'street name') as it appears this OP does, the broker will automatically handle the action; see money.stackexchange.com/questions/106558/… . However, merging a public company requires a vote of stockholders, so in either case (direct or street name) you will first receive a 'proxy solicitation' asking you to vote your shares.
    – dave_thompson_085
    Mar 17, 2019 at 13:29

1 Answer 1

Reset to default
1

You do not have to sell now. When the merger closes, your broker will automatically sell the shares for you.

However, you may want to sell now, to avoid the risk that the deal falls apart. You mention that the current market price is close but not equal to the acquisition price. Merger arbitrage professionals trade these deals based on the estimated probability of successful closing. But if you are not in the risk arb business, you don't necessarily want to place that bet (by continuing to hold) when the upside from here is small. You can decide if getting the last few percent is worth the small chance that the deal fails, no other buyer steps in, and the stock plunges.

Improve this answer

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .