Which direction does the stock price go?

Question

when a company A brought company B? does the stock price goes up for company A or company B?

I guess my real question is does company stock goes up after a merger or buy out?

Answer 1

Typically, initially, company B's stock price will rise, while company A's will decline slightly.  

Acquisitions usually include some sort of premium over the stock's current trading price, although this isn't always the case.  So the stock will rise immediately to a level very close to the amount offered per share.  Typically, these increases are in the range of 10% to 35%, although there obviously ahve been many many instances where the acquisition premium was much higher or lower.  even negative.

the buying company's stock often goes down around 3% to 8% (i'm speaking veyr generally and these aren't exact numbers).  This reflects investor concerns over various risks associated with the potential acquisition, including actual transaction costs.

Also affecting values are the terms of the announced deal.  Cash deals usually indicate more value in the acquired company, whereas if a company uses its own stock as currency, the perceived value is probably lower.

Studies show that after 5 years, a majority of merged entities where one of the companies was purchased using stock, trade at lower stock values than before the acquisition.  

Answer 2

That all depends on how the Financial Wall Street gnomes view the takeover or merger. Usually company B goes up, company A -- depends.