New shares

This topic contains 3 replies, has 3 voices, and was last updated by Avatar of John Moffat John Moffat 1 year, 9 months ago. This post has been viewed 41 times

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    nandinigirish
    Participant
    • Topics: 4
    • Replies: 6

    Dear tutor,

    Please can you clarify this:

    When a predator company whats to buy target company:
    1.P offers his 5 shares to T in exchange of 6 shares in T.

    My question is: is that always the predator company needs to issue new shares to buy co T shares.

    Thanks in advance.
    Nandu


    Avatar of John Moffat
    John Moffat
    Keymaster
    • Topics: 3
    • Replies: 5949

    It is the predator company that will have to pay something to buy the target company.

    They can pay in various ways (they could, for example, pay cash!), but if they choose to pay by issuing shares, then it is always the predator company that will issue new shares to give to the target company shareholders as payment.


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    dazhong0703
    Participant
    • Topics: 44
    • Replies: 130

    Since target company also gives shares to predator company, can it consider as target company acquires predator company? Thanks.


    Avatar of John Moffat
    John Moffat
    Keymaster
    • Topics: 3
    • Replies: 5949

    When the predator company takes over the target company, the shares in the target company are cancelled – it no longer exists as a separate company (however the predator company pays for them). So in no sense does the target company take over the predator :-)

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