I have some questions about shares I own in two companies - please help!
21 April 2021
Question by Geoff
Hi, I have shares in 2 companies, the bigger company wants to buy the smaller company, but then the bigger company wants to change it's name to the smaller company (because the name is better known).
1) If the buy out happens, do I lose the shares in the smaller or do they get transferred to the bigger company i.e. I get more shares in the bigger company?
2) Do I sell the smaller shares and buy more of the bigger company shares?
Answered by Tom Eyles
This is a complicated one and subject to the exact shareholders agreement, articles of association and deal terms. Are the companies listed? If there is a compulsory purchase order when the smaller company is bought then you will be paid either market or nominal value and lose those shares (subject to the articles); unless provision allows for transfer to another share class in the bigger company.
With a purchase, this may have a knock on effect of increasing the value of the shares you hold in the larger company too, regardless of the name change, as their size/reputation will hopefully be enhanced by any transaction. For now, I’d see if you could find out more specifics of the articles and any deal terms as this will narrow down how your shares in both companies will be impacted.