What happens to a stock U own if that company is bought/absorbed by competition? Will the shareholder gain$?

Question

What happens to a stock U own if that company is bought/absorbed by competition? Will the shareholder gain$?

Answer 1

If you own the aquired company, typically the value of your stock goes up through acquisition (but not always). Often the acquirer is more at risk for stock going down, but it may also go down or up, depending on the market's perception of profitabilitity, productivity gains, etc.

Answer 2

You could own stock in a company that is bought by another company.  However the company that bought your could go bankrupt.  Think of banks that were recently bought by Indy Mac.  Indy Mac filed for bankruptcy.

Answer 3

When a company is bought by another, it pays a price for its stocks. Most of the time the price is higher than the current market price, and the stock price will align itself on the price of the transaction and you gain. Sometimes it's lower, like in the case of JP Morgan buying Bear Stearn's and you lose money.