Ask the Fool The Basics of a Buyout

Q: When a company is bought out, should its stock price go up or down? - P.U., Bellingham, Wash. A: It depends on the deal. If the firm's current market value is around $5 billion and it's bought for $10 billion, the stock price may leap up on the news. When a company is very desirable, perhaps due to its products or growth prospects, a buyer may have to outbid other interested companies. But if a firm is struggling, it might get scooped up for a song.

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