I feel like an idiot for buying ZNGA at $3/share. Now, there is talk of having the company go from public back to private? What does this mean for me as a public shareholder?

  • Doesn't it require a buy-out?
    – littleadv
    Oct 12 '12 at 18:38
  • I assumed ZNGA would buy the shares. So, you wouldn't be a shareholder is my guess.
    – MrChrister
    Oct 12 '12 at 21:14
  • 2
    This question is suddenly very relevant again with the news that Dell Computer (a much bigger player than Zynga) is going private.
    – JohnFx
    Feb 7 '13 at 14:28
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    @Kirk, you are at breakeven right now. No need to feel like an idiot. If you are options-approved, you can sell a call against these shares, and get back to a decent profit. The Jan '14 calls look highly priced. Feb 7 '13 at 19:51

I can see two possibilities.

Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach.

The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the "market" part of "stock market".

That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.

  • Can they effectively force you to sell your stock in your first scenario?
    – JohnFx
    Feb 7 '13 at 14:29
  • @JohnFx Yes. If I understand correctly, they hold a vote and if majority approves - everyone is forced to sell.
    – littleadv
    Feb 7 '13 at 19:07
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    @JohnFx The exact rules almost certainly vary by locale, but yes, it's probably safe to say that if one entity manages to buy a large enough fraction of the shares, they can (not necessarily must or will) force a buy-out from the remaining shareholders. I think it takes more than a 50% majority for that, though. For example, I think (it's never really been a concern to me) that in Sweden, once you have 90% of the votes you can force a buy-out of the remainder.
    – user
    Feb 8 '13 at 8:24
  • that buyout deal is required right? they can't just decide to privatize and then leave you out cold?
    – dtc
    Feb 15 '17 at 19:43

If a deal is struck, you're part of that deal because you own shares. If someone offers $10/share for the entire company, you'll get that. If the stock price is $1.50 and someone offers $2/share, you'll get that.

  • Edited my answer. What I was getting at is that there is a legal claim on the company that can't be bypassed with a private deal.
    – mbhunter
    Oct 16 '12 at 18:06
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    This depends on local law, but generally you can only take a company private if enough shareholders agree. Only then is it possible to squeeze out the remaining shareholders like you describe. Otherwise, if someone offers $2 per share, I can flat out refuse it regardless of the marketprice.
    – MSalters
    Oct 23 '12 at 10:58

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