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I know a company can buy another company with stock. Doesn't that mean that even a tiny company can buy a bigger company with its stock as long as the big company will accept?

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Yes, if the larger company's owners or board of directors feel that the smaller company's prospects are exceptionally good. For example, the board of Sears voted in favor of an acquisition by Kmart, the acquisition being orchestrated by the largest investor in both companies, a boy-wonder hedge fund manager.

https://www.nbcnews.com/id/wbna6509683

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  • That's interesting. Was Kmart's market capitalisation less than $11bn at the time? – Darby Bond Feb 28 at 21:17
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A ‘small’ company wouldn’t have enough stock to pay for a ‘large’ company - otherwise it would not be called ‘small’.

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  • Yes, it may have a small market capitalisation but it can always issue new shares for the purpose of the acquisition right? – Darby Bond Feb 28 at 21:15
  • Issuing new shares waters down the value of the existing shares, so price falls proportionally. It doesn't matter if you have a million shares for 10 $ each, or two million shares for 5 $ each - it only multiplies up to 10 million $. New shares are not a money-printing machine. – Aganju Feb 28 at 22:09
  • Yeah but these new shares are being issued for assets so why should the price of the stock fall? – Darby Bond Mar 1 at 4:52

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