share values, how they work??

[timwilky]

I own a couple of grand in company shares.

Recently due to potential sale of the part of the business I work in, the price has gone up. Assuming the sale goes ahead. I am transferred to the new owners and presumably carry on regardless.


But my shares in my former employers, what is likely to happen??

OK the size of the company, its order book, scope for growth etc is substantially reduced, thus I assume reducing the share value. But suddenly they are sitting on $17 billion in cash.

Whilst obviously I would expect them to invest wisely, I would also be expecting big dividends.

Is this wishful thinking? Does the current share price reflect the value of the company assuming the sale is to go ahead? and will they plummet if the sale is scuppered?


Now I am starting to understand why the stock brokers earn big money!

[Sir Trev]

As part owner of the company being purchased you will be offered a price for your shares or an option to take up shares to a similar value in the new owners*. The offer should reflect how much they want your company and rumours affecting the current stock price are all part of the game. I would not expect a big dividend - if paid out before the takeover the lessening of the cash balance will lower the value of the company and lower the offer price accordingly, unless your directors start playing silly buggers to line their pockets of course...




*So if they offer you, say, two grand to buy your shares you may well get an option to take two grand's worth of stock in the new company. The cash in or stay in decision is up to you and how much faith you have in the new people running the show.

[timwilky]

I would understand that if it was a full takeover, It is one mega rich global company trying to buy one division of another global company. The original company will still exist as a global organisation, just with a small product list.

[andrewsmith]

Originally Posted by timwilky

I would understand that if it was a full takeover, It is one mega rich global company trying to buy one division of another global company. The original company will still exist as a global organisation, just with a small product list.

are they in parent company or the division?

[Bibio]

are the new company just buying the R&D section by chance?

When United Utilities sold off their electricity company, we were bought out of our shares (Don't remember much i was a 2nd year apprentice buying shares that i didn't understand at the time but i do now on how to double your money). If it's a couple of grand being inflated by a purchase price is it worth just getting rid at the inflated price or not?

[PyroUK]

Tim, whilst possibly not as big as your company, my former employer did the same.

Can I ask, are your shares bought through an employee share scheme? I would assume so as I can't figure a suitable way for it to be managed another way.

Is you new employer floating?

If it is an employer share scheme, when the sale goes through you will have two options. 1 you can sell your shares (tax free if you have owned the shares for more than 3 years) and 2 you can opt to keep the shares as an individual share holder which will go through a normal mgt company such as capita or whatever they are called now.

Option 2 "may" be better if you have owned the shares less than 3 years so you can clear the tax window.

Depending on whether or not your new employer is floating and if you took option 1 you could purchase shares in the new employer.

If you are lucky and the new one is floating they may offer you some free shares. This is how I got mine, my employer wasn't floating and when they finally did, all employees were given 200 shares each.

As far as I can tell they can't offer to swap your shares, as they need to be bought and sold in the normal fashion. The new employer would effectively then be buying your shares off you.

Depending on your personal circumstances go with 1 or 2, a lot of us at the time of sale cashed in on the tax free bonus me included. In hindsight I would have played the long game, my old employer went on to do quite well and still is.

Depends how strong you think they are without the subsection being sold. In my case the company reverted back to where it started as it ditched the adopted child that was my section.

Oh and most of the time according to my understanding the values are worked out based on the day of the week and what direction the wind is blowing.

Hope that makes sense!