OK, let me try to see if I understand what you are trying to say.
Company A agrees in principle to buy Company Z for $2M, which they divide as $1M in cash and $1M in stock, or, say, 200,000 shares at the current price of $5. Then, the stock price goes up to $6, making the value in stock $1.2M. So according to your scenario, Company A feels they are now overpaying by $200K and decides to intentionally do things to get the share price down to $5 again so as not to overpay. Right?
Ummm....
First of all, Company A is not buying the stock at market so they aren't losing a penny if the price goes down, right? Moreover, if the price goes down they lose buying power as their shares are worth less. So, I see absolutely no incentive in this instance to manipulate the share price down. Conversely, if they agreed to a set dollar amount in stock, they'd most likely want to manipulate the price UP!
Am I missing something here?
- Jeff |
