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Mergers and aquisitions: Shareholders have rights

On Behalf of | May 12, 2021 | Corporate Litigation

Residents of Massapequa and other areas of New York may want to learn about the rights of those who own stock in companies. Shareholders in a publicly traded company have a say in corporate matters. That might include matters that directly affect their stock ownership, such as a merger or acquisition as well as a stock split.

What are mergers and acquisitions?

In an acquisition, one company purchases the other outright. A merger is the combination of two firms that form a new company under one name.

An example is Daimler-Benz and Chrysler. Each ceased to exist when the two firms merged. A new company, Daimler Chrysler, was then created. This new company then issued new stock with the surrendering of old stock.

The two companies in a merger may increase their business effectiveness by combining. As an investor, you may have voting rights on these decisions involving the company merging with another.

Proposed decisions may have an impact on the price of shares

Although the amount of stock you own can determine how important your vote is, knowing about proposed decisions may affect you no matter the amount you own. Voters may affect profitability of the company, so they may have some say in voting regarding mergers and acquisitions.

Hostile takeovers involve more voters

There are certain market movers or “hostile” activist investors. They will amass a large stake in a company through purchasing shares. Enough shareholders can then sway a vote. They might even change the direction of the company with enough votes.

If you need help in understanding financial matters or your shareholder voting rights, it may be a wise move to hire a financial advisor or attorney. They may help you act in your best interests by explaining the legalities involved. They may also be able to help you meet your financial goals more easily.