corp question Forum
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Heath485
- Posts: 1
- Joined: Wed Feb 26, 2014 10:34 am
corp question
I don't really have an understanding of this from corporations, but was wondering why a company would rather go being bought out for a lower share per price by a company that has less shares outstanding than for a share price which is a little more (like $2) but there is a a huge amount of stock outstanding?
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bandenjamin
- Posts: 172
- Joined: Thu Mar 10, 2011 3:25 pm
Re: corp question
So I'm not sure I'm fully understanding your question but...
Company A wants to be bought and has 100 shares outstanding. I'm the sole owner of company A
Company B wants to buy A @ $10 a rate of $10 per share and has 100 shares outstanding
Company C wants to buy A @ $12 a share but has 900 shares outstanding.
Assume that both companies are willing to pay out either in cash value for shares or will convert Company A shares to their companies shares.
Also assume that both companies are basically the same in terms of revenue and growth potential.
With company B I get to become a 50% owner, or just cash out my company to them for $1000
With company C I can either become a 10% owner or cash my company out for $1200.
Clearly if I want to windup my business and end my involvement Company C pays better, but if I just want to reduce my overall involvement but maintain an investment, it would be better to be a 50% owner in company B than a 10% owner in company
HTH
Company A wants to be bought and has 100 shares outstanding. I'm the sole owner of company A
Company B wants to buy A @ $10 a rate of $10 per share and has 100 shares outstanding
Company C wants to buy A @ $12 a share but has 900 shares outstanding.
Assume that both companies are willing to pay out either in cash value for shares or will convert Company A shares to their companies shares.
Also assume that both companies are basically the same in terms of revenue and growth potential.
With company B I get to become a 50% owner, or just cash out my company to them for $1000
With company C I can either become a 10% owner or cash my company out for $1200.
Clearly if I want to windup my business and end my involvement Company C pays better, but if I just want to reduce my overall involvement but maintain an investment, it would be better to be a 50% owner in company B than a 10% owner in company
HTH
