Combination

The combination merger entails two companies combining together to form a totally new entity. The process is as follows:

1. The first and second companies make an agreement to merge to form a third company. This combines the powers of the two companies.
2. The shareholders of each of those two companies will receive shares of the new third company based on their positions. The number of shares will be determined based on how much of an investment was made into the older stock.
3. People might also be given the option to receive cash for their stocks.

For example, you might have 100 shares of stock in the first company and 100 shares of stock in the second. You might be given $10 for every stock from the first one and then $15 for each share of the second.

There’s also the potential for you to get extra shares or even a combination of the two. You might get 1.5 shares of the first stock for every share of the second stock you have, for example. You might even get 3 shares of the new third stock and $4 for every share you have in the first stock. These examples are hypothetical, but they show how there is a great chance for you to make a good profit.

The terms associated a combination merger will vary based on what the two companies have agreed upon. You will be given details of the proposal before the merger is completed. This should give you an idea of whether you will make a profit from the stock or if you are better off selling your old stocks before trading is halted. It is often difficult to determine the value of the new stock after the merger goes through. You would have to review the total earnings of the companies involved and their prospectus to see if there is a possibility for that business to grow and thrive.