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Never invested before, have a quick question

Discussion in 'Business, Investment and Economics' started by CrustyJugglerz, Jun 22, 2019.

  1. CrustyJugglerz

    CrustyJugglerz

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    Hey guys, first time on these forums, first time investing too, amateur when it comes to stocks etc.

    So my quick question is, I know that Company X (publically listed) whos shares are around 0.5$ a share are about to be bought by company Y or Z, whos shares are around $2500 and $300 respectively.

    I used to work for company X so i know their potential in their industry is enormous as they have patented tech/processes that no one has been able to replicate despite other companies sinking hundreds of millions into R&D and failing by large margins, which is why they want to acquire them.

    What happens to company X's shares after that merger? Or are there several outcomes depending if its a hostile takeover, etc.

    Any insight would be appreciated.
     
  2. Zaxon

    Zaxon The voice of reason

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    There are several outcomes. In an acquisition, the Acquirer will buy out the Acquiree, usually at a premium. They can pay cash, stock (their own company shares), or a mixture of the two. In the case of cash, a capital raising or debt may need to take place for the acquirer.

    In the cash of a merger, two companies become one. Sometimes the new company is named a hybrid of the two previous companies names. Shareholders of the two merging company will end up with a proportional amount of stock in the new company. It may not be 50/50. It could be 40% for company A and 60% for company B, etc.
     
    cynic likes this.
  3. basilio

    basilio

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    That is a very interesting takeover situation you are describing. Adding to Zaxons comments I would ask if this proposed buyout was welcomed or hostile ? Is company X in a difficult financial position or just can't commercialize its technology ? Who are the major share holders ?
     
  4. CrustyJugglerz

    CrustyJugglerz

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    I know company X presented a deal to Y and they turned it down originally, but company X dominates a specific product in the mining industry in terms of life expectancy, well over 500% of the nearest competitor, and Y and Z want to buy them to have the technology exclusively for themselves. As it stands X contracts for company Z, company Y found out about it and want their tech, hence bidding war.
    When i worked for them over the 2 years their stocks went from .18 to .43, their tech is highly desired, financially theyre booming by themselves, the problem may be the commercialisation, only because of the major companies like Y that have majority share of that market (plus their international sales manager is a dolt)
     
  5. sptrawler

    sptrawler

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    Do you have shares, in any of the companies?
     
  6. CrustyJugglerz

    CrustyJugglerz

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    Not currently
     
  7. basilio

    basilio

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    It's an interesting proposition. From my experience when companies decided to take over a competitor with a superior technology it is usually to shut down the competition rather than use the superior product. E$ssentially they stand to make more profit selling their inferior product on a repeat basis instead of a longer lasting better quality alternative which requires far less turnover. That's capitalism.

    Given the economic disparity between the companies the bigger guys can afford to make a God father offer to ensure a non competitive field of operations.

    Alternatively they can keep the company operating but price the better technology way out of reach and ensure it isn't an economic threat. Again this is a usual mode of operations in this situation.

    It looks like a good opportunity to make a buck on the possibility of such an offer..:2twocents
     
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  8. CrustyJugglerz

    CrustyJugglerz

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    Doesnt seem like the case this time, given that Y desperately wanted their tech to keep up with Z, and i know the mining companies would revolt if suddenly this product wasnt available anymore as it reduces downtime significantly.
     
  9. basilio

    basilio

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    Great! For once we might see a great technology actually staying around. But it ill cost more with a new player.
     
  10. Gaz1991

    Gaz1991

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    Hi guys,

    I’m new to this forum but I would love some advice, information or some guidance on trading. What I’m looking for is a life coach or mentor to teach me the ropes on how to trade effectively for a long to medium term investment.

    Thank you and any support would be appreciated.
     
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