General Stock Investment Strategies/Sprint
Hello, how are you doing? I have a question about a stock I own. The stock is Sprint. I bought this stock and since I have owned it, its share price has risen. I could sell and take a profit but they are getting ready to be bought out by another company. When a company is bought out how does that effect the stock I now have in the company? One other question, when you are looking for stocks to buy what are the things you look for. I have used stock screeners but donít know the best things to look for that give the companyís stock price a better chance to go higher in the future.
Thank you for all of your help.
What happens in a buyout depends on the specific deal - it can be an all-cash offer where your shares are automatically sold, a stock swap of some kind, or a combination of the two. Sometimes you can choose what you want to do, other times it's automatic. The tax effect (if shares are held in a taxable account) can vary depending on whether it's a stock-for-stock swap or cash deal. So to be sure, you always have to read all the paperwork that is sent to shareholders about the merger/acquisition, so you understand the terms of the deal and any possible elections shareholders can make - in addition to voting on whether to do the deal at all.
As I recall this Sprint deal lets you choose (elect) what happens to your Sprint shares when the deal closes. You can take cash or stock, and if you don't tell your broker which you want you'll receive cash. But if too many people choose cash - more than is available in the buyout - you'll receive some stock and some cash. Either way, the original Sprint shares will disappear as the company will be fully acquired.
This is all off the top of my head so I may have the details wrong...I'd suggest reading the shareholder mailing that you received, or find it online - it's probably on the Sprint website in the Investor Relations section, or you can pull up a quote in Yahoo Finance or a similar site, click the link for SEC filings, and find the announcement there. At some point it was an SEC filing.
As for your other question - what are things to look for when buying stock - can you narrow that a little? It's a huge topic of course...