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A company I have stock in just entered a merger agreement with another company. I received a letter today detailing what will happen to the stock I have in the company, but I don't understand what it means. Please help me interpret!

At the effective time of the merger, each share of [Company]'s common stock, no par value per share ("Company common stock"), issued and outstanding immediately prior to the effective time, other than shares owned by shareholders who have dissented from the merger and properly demanded payment of the fair value of their shares in accordance with applicable [state] law, and shares owned by [Other Company] or any other direct or indirect subsidiary of [Other Company], will be converted into the right to receive $25.00 in cash, without interest and less any applicable withholding taxes.

In particular, I want to know what "no par value per share" means and what will happen to my stock. I think the statement says I either have the choice to sell it in advance or receive $25 per share at the time of merger. I can't tell if there are any other options.

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The "par value" is a technicality that you can ignore in this case, and it has nothing directly to do with the merger. When a company issues stock, it puts a "par value" on the shares. If it later issues more shares, they cannot be issued at less than par value.

The rest of the notice seems to be as you said: If you hold until the merger takes effect, they are going to give you $25/share and your shares will be gone. As always, you can try to sell on the open market before that time instead, although you can bet that not too many people are going to want to give you more than $25/share at this point.

  • There is no option of converting the stock over to that of the New Company's? Directly I mean, I know it's an option to sell my stock, wait for the merge, and then buy the stock. I interpret the paragraph I quoted in my question that the stock of both companies engaging in the merger will be bought out at $25/share. – NeutronStar Apr 19 '16 at 13:59
  • Is the new company held privately? Most often the current shares are converted to shares in the new company. – Pete B. Apr 19 '16 at 15:24
  • It seems like usually you get shares in the new company, but that's not what your notice says. We don't know what companies are involved, so I based my answer only on what you quoted to us. @Joshua As asked by Pete Belford, if the buying company is privately held, there may not be any shares to be had. Other circumstances could also explain it. – user32479 Apr 19 '16 at 16:22
  • @PeteBelford, the [Other Company] currently is publically traded. – NeutronStar Apr 21 '16 at 14:35

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