Value of shares increase after buyout announcement ?

S

saltydawg02

New member
Why do investors run up the value of an individual stock, after a buyout announcement has been made?
I recently watched a stock go up from approx $11. a share, to approx $21 a share. This was just based on an announcement that a deal was made. In doing some homework, I notice that the "deal" offers a buyout ( close to the $21 range ) but that is for the stockholders of record, the day before the deal was announced. How does this benefit the investors who buy stock the day of the announcement ?

Is this any different, if a company will be taken private afterward ??
So if I have this right. When, and if the deal goes through, everyone owning a share gets $21 ??
Essentially, the $11. stock owner has realized a $10 gain either way. Everyone else participating in the rise of the $ value of the stock is doing so, to ultimately cash in on the difference of the price where they entered, and ultimately the $21 top offer by the company taking over.
How do things change if the company is purchased, and then taken private ?

Trying to wrap my head around how this all works.
 
there is no difference in the change of the stock price based on the entity doing the acquiring. regardless if the buyer is a publicly traded company or a private equity group the offer price will dictate the movement in the stock.

the benefactor in a buyout offer is the holder of the stock the day the offer is announced. this is simply because the share holder realizes the sudden move higher (the 10$ move in the stock you are discussing). the offer price isn't limited to the shareholder of record, it will be the price any shareholder receives regardless of when the stock was purchased. typically the stock will stay around the 21$ level unless the market thinks that a second contender will step in and offer a price higher than the 21$ offered by the original bidder. the stock could also move higher than the 21$ if the market feels the current offer isn't enough and will not be approved by the current shareholders (they have to approve the offer unless it is a hostile takeover). in a hostile take over the entity making the offer could own enough shares (or have enough influence) to force the sell but i digress. if the market feels the offer will not be approved and that the entity making the offer will make a higher offer that would move the stock price higher. if no event is likely to happen which would impact the offer price any change above or below the 21$ is generally just traders causing mild fluctuations in the price. doesn't seem to make sense huh? the market's philosophy is any thing can happen...

being a retired broker i know it is a good day when you own shares of a company and it moves from 11 to 21 in a matter of minutes...unless you think your stock is worth more than 21 or you bought it for more than 21$.

i hope you owned you 21$ a share stock, if not i hope you are in the next big move.
 
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