What happens in a Stock Buyout?

When one publicly traded company buys another, a few different events may happen with the stock of the firm being bought. First, the acquisition may be a cash purchase. This means the buying firm may pay cash for all outstanding shares of the firm being bought. In this instance, as a shareholder of the company being purchased, you would receive an offer of cash for your shares determined by a formula agreed upon in the purchase offer.

Second, the purchase may be a stock for stock purchase. This means the buying company may purchase the second company by offering shares of its own stock in exchange for the outstanding shares of the company being purchased. Again, the amount of shares offered would be subject to a formula agreed upon in the purchase offer. As a shareholder of the company being bought you would be offered a certain number of shares of the new company. This might dilute the shares of the purchasing company if they issue new shares for the transaction. However the hope would be that the assets and liabilities being acquired in the purchase would offset this dilution.

Lastly the purchase may be a combination of both stock and cash, thereby combining the two situations described previously.

It depends. In some cases you would be offered a percentage of shares of the buying company, or it could be some shares and some cash, or it could be strictly a cash tender offer where they offer you cash for your shares for a limited time period. There might even be more than one choice. If you hold onto your old shares instead, eventually they would no longer be traded on regular exchanges.

There should not be any trade fee for exchange or cash, but their can be tax implications for partial or full cash payout unless it is in a qualified retirement account.