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To: Dany Tremblay who wrote (2802)	4/7/1999 1:27:00 PM
From: Josef Svejk	Respond to of 28311

Splits? ;-)

To: Dany Tremblay who wrote (2802)	4/7/1999 1:40:00 PM
From: RTev	Read Replies (1) \| Respond to of 28311

where will the stock required to make big buy-outs come from? Company holdings? I'm shaky on the the accounting methods used in these things, but I believe a company usually issues new shares for the purchased company. So: JoeCo agrees to buy MaryInc on a 1 to 2 stock deal. JoeCo would trade one share of its stock for each 2 shares of MaryInc. It doesn't usually get the stock from the currently outstanding shares, but rather from "authorized shares". If there were 100 shares outstanding of each company before the merger, the combined MaryJoe would have 150 shares outstanding after the merger. The trick in this kind of thing, as I understand it, is that JoeCo would have gotten authorization for (let's say) 500 shares from its stockholders. The company has to be very careful about issuing more shares out of that pot, since they don't want to dilute the value of the current 100 shares, but "good" mergers are generally considered a valid reason for doing so. Stocks occasionally plummet after merger announcements because shareholders decide the merger would dilute the value of their shares. If a JoeCo shareholder figured that the combined MaryJoe would be worth only 25% more than JoeCo, she'd probably sell when the managers announced a merger that values the combined company at 50% more than Joe (witness Lycos/USA Networks).