Here's a real example from today. Expedia is buying Orbitz at $12/share. Orbitz is currently trading at $11/share. So if I buy it at $11/share, do I make $1/share?
It depends on the timing of the events.
Sometimes the buying company announces their intention but the other company doesn't like the deal. It can go back and forth several times, before the deal is finalized.
The specifics of the deal determine what happens to the stock:
- They can buy all the outstanding shares and the stock holder of those shares get the money.
- They can trade X shares for the old company for Y shares of the new company.
- They can do a hybrid where X shares are traded for Z shares and some cash for the fractional shares.
The deal will specify when the cutoff is. Some people want the cash, others want the shares.
Some will speculate once the initial offer is announced where the final offer (if there is one) will end up. This can cause a spike in volume, and the price could go up or down.
Regarding this particular deal I did find the following:
Additional Information and Where to Find It
Orbitz intends to file with the SEC a proxy statement as well as other relevant documents in connection with the proposed transaction with Expedia. The definitive proxy statement will be sent or given to the stockholders of Orbitz and will contain important information about the proposed transaction and related matters. SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The proxy statement and other relevant materials (when they become available), and any other documents filed by Expedia or Orbitz with the SEC, may be obtained free of charge at the SEC's website, at www.sec.gov. In addition, security holders will be able to obtain free copies of the proxy statement from Orbitz by contacting Investor Relations by mail at ATTN: Corporate Secretary, Orbitz Worldwide, Inc., 500 W. Madison Street, Suite 1000, Chicago, Illinois 60661.
I think the correct statement is that Expedia wants to buy Orbitz for $12/share. The market price is $11, which means there is somebody willing to sell for that price. But you can't say that a stock price of $11 means that everybody is willing to sell for that price. And Expedia is unlikely to bid $12/share for just 40% of Orbitz shares; they'll want at least a controlling majority.