What happens if I own stock in a company that is purchased by another company?

What happens if I own stock in a company that is purchased by another company? Do they "cash out" my shares and give me the same amount of money's worth of the new stock? Or do I get the same number of shares in the new company as I had in the one that was purchased?|||When companies merge, or are bought outright, then any existing stock will be converted into stock for the new "parent" company. This is not done on a 1-to-1 ratio, as it would devalue the parent company's stock; instead, it's done based upon the relative stock prices as of a given date (usually the date of acquisition). So if you have 1,000 shares of Bear Sterns (worth $10,000 per JP Morgan Chase's offer), then you'd find yourself with 217 shares of JP Morgan Chase (as their stock was trading at $46.06 as of last quote).





To determine this, divide the acquired company's stock price (or trade price, if it's a straight stock acquisition like the Bear Sterns/JPMChase deal) by the acquiring company's price. So you'd divide $10 by $46.06. This will tell you just how many shares one share of your stock will be worth in the new stock. Then you take that number and multiply it by the number of shares you currently have of the acquired company.





So it'll look like this:





(10/46.06)*1000 = 217.1....which leaves you with 217 shares in our example.|||Depends on the terms of the agreement between the companies. If its a buyout including shares you would get an equivalent amount of $ amount shares in the new company. So for arguments sake let's say the JPM deal goes through and they purchase BSC for $10/share. If JPM stock were trading for $40 (let's keep it simple) you would receive one share of JPM stock for every 4 shares of BSC you owned. So if you had 100 shares of BSC you would receive 40 shares of JPM in return. If it was a cash transaction, and you owned 100 shares of BSC, JPM would just send you a check for $1000.





Hope that helps.|||LOl, This was exactly what was going on my mind today. Let's say you own stocks at $10 in bear stearns, and JP morgan buys the company. What is gonna happen?


I will be checking for the answersof your question. GOOD QUESTION. I did not get to post the question myself today.