How do stocks work with game buyouts? (EA & TakeTwo)

Netzoko

I was wondering if anyone knew how stocks work with possible upcoming buyouts. In the example of EA and Take Two, EA is offering shareholders 64% per share over the current closing price.

Now, would this mean that I could buy stock in Take Two right now, then sell it for 64% more after EA buys it? If so, it would seem that offered buyouts would increase stock price in the company even if it isn't obtained.

Am I missing something here?

baff

You could if someone was willing to sell it to you.

But if they were intrested in selling they would sell direct to EA, not you.

 

Stock prices won't increase unless someone actually sells. Since TakeTwo don't want to be sold to EA, no one is selling their stocks, so the price isn't changing.

Or at least not enough people are selling their stocks for the price to change.

This is a  hostile take over. EA must think it is close to acquiring a controlling share of the company. 

 

Take Two's stocks last traded at $25.33. So if you could get them, you would be making an instant $.67 per share sold to EA, less transaction fees and any capital gains tax you are liable.

EA's $26 offer however is dependant on the Take Two directors, recinding a shareholders rights agreement.

 

This essentially means, that Take Two reserves the rights to print more shares of their company if EA gain a controlling share. Effectively Nullifying any take over without their permission.

 

So as yet, EA aren't paying 64% over the odds at all. They are just promising to, to lure the Take Two directors into selling.

If you buy them, the take over may never happen, or Take Two may leave it until after the launch of the next Grand Theft Auto, in which case they would be worth much less.

These shares pay no dividend, and today the share price has been falling not rising. It's a gamble, with the advantage going to the Take Two directors, who unlike you can accurately predict whether the shareholder rights agreement will be dropped by them or not.

 So if you are looking for a short term, 1-3 month investment with a possible capital gain of about 2.5% this could be for you.

Munki

Lemme explain.

Imagine a company had 100 stocks.

Each stock essensially gave you 1% control of the company. So if you have 30% of the stock, you own 30% of the company and have 30% of the power.

Imagine each stock had a value of 1 dollar. The company would be worth 100 dollars.

In order to get control of the company, EA would have to have enough control of the company that what they say goes.

If for example to make a decision you need the support of 51% of the share holders. EA would need then have to own 51% of the company, so that no other combination of the other share holders could disagree and stop it.

Now what they are doing is offering 64% over the value of the stock. So if the stock is worth 1 dollar, they are saying they will offer $1.64 per stock.

What this does is encourages everyone to sell them their stock.

The thing about stock is that you have to buy it from somebody who has it. So right now I dont think there are too many people who would be willing to sell Take2 stock right now.

Thats pretty much the very VERY basic idea if you were confused about the process, I wont rehash what Baff has said about the shareholders right agreement, ad he covered that pretty well.

Entreri28

If you really want to make some money off TTWO I would short it.  Im not confident enough about this to actually do it myself though.  I think most likely the money has already been made.  I give it a 50/50 chance of going through.  Even if it does I heard rockstar and thus GTA arn't coming with it.

paulscott

In most cases to actually control a company you need at most 12% of the stock.  since most people don't vote(for board, or anything else).