4 ms·
Isn't stock == cash when the acquiring company is public?
by akavi 14y ago
Isn't stock == cash when the acquiring company is public?
- nuclear_eclipse 14y agoAssuming a vesting period, that implies much less liquidity from the deal, and very much relies on the longterm value of the stock. IMO, stock later is worth much less than cash now.
- SurfScore 14y agoExactly. And stock is typically much cheaper for a company to spend than actual cash. A perfect example of this was the Facebook-Instagram acquisition. It was right before Facebook had their IPO, so it was much cheaper for them. Ironically, since Facebook's share price dropped so quickly after IPO, that billion dollar valuation ended up being closer to $715M source -- http://www.theverge.com/2012/10/24/3551872/facebook-instagram-acquisition-715-million http://www.theverge.com/2012/10/24/3551872/facebook-instagra...
- hkmurakami 14y agoFor a company like Linkedin which has been on the market for a while, you can buy a bunch of put options. It comes with a cost obviously, but it's a good hedge for an all stock transaction. IIRC this is what Mark Cuban did when he sold his company to Yahoo!
- ChuckMcM 14y agoNo. Typically that stock comes with a constraint. When the company I helped start was acquired in 1999 there was an 18 month 'hold' on selling stock resulting from the transaction. The math did not work out in my favor :-)