What is the practical consequence of a buyout for a retail stockholder? Does the broker automatically sell the stock for them? What if their asking price is higher than the buyout number? Do smaller shareholders ever get consulted about whether they agree to the buyout?
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2 Answers
I've seen many buyouts in my own portfolio, including the company I worked for. There have been several different scenarios:
- My employer was bought by Venture Capitalists. All stockholders, after the transaction was approved, got cash.
- My employer eventually was taken public again, but was subsequently bought by another company. After stockholders approved the transaction, we got stock in the new company for stock in the old.
- For a graduation present, I got my first stock. Eventually, it was bought out, in a cash plus stock deal. I got a chunk of stock, plus a chunk of cash. The cash was, itself, more than double what was paid for purchasing the original stock.
The terms of the deal are subject to the deal -- frankly whatever makes sense to the buyer and that is accepted by the seller.
So sometimes brokers charge reorganization fees. check into those for your broker. I've not seen one in a while, but my brokerage account is substantial, and often that's a perk they offer higher-value accounts.
Also watch out for taxes. The transaction where my employer was bought by another publicly traded company -- we got bit because the IRS treated it as a taxable transaction, and all our RSUs were effectively sold and then repurchased. So we ended up with a big tax bill (capital gains) without any cash to offset the big tax bill. I suspect its because my old employer was a US based company, whereas the new company is not.
A buy out is agreed by shareholders. Plus most countries have regulation protecting minority interest.
Depending on the terms of buy out, you may get equivalent shares of buyer company or cash or both.
