What should I do with my shares of Zynga now that the Co. has been sold. Hold? Sell?
when a stock rises too fast, the following day it will drop.
If you bought ZNGA around 6.00, great sell and take the profits off of the table.
Let’s look at the below chart compared to the S&P 500 where you bought the stock. ZNGA’s high was around 12.32.
Just a thought,
Hi, japast, I apologize for my delayed response but I think it is still apropo.
There’s usually no rush to make any decisions regarding a merger. The question still has to be put to shareholders via a proxy vote by both companies, and there’s that sticky question of regulatory approval. If either company is an active recommendation of a premium service, Analyst Team will update the status of the recommendation at some point. If they do not, you should assume the status quo is to hold onto the position.
Generally with M&A activity, the market price of the target company will rise to meet the premium value offered, reflecting market confidence that the deal will close. Sometimes the market is not happy with the merger idea, the premium offered, or is skeptical of the chances it will close. In these cases, the market price of the target company trails the premium offered. Maybe they the market is holding onto hope that there will be a competing offer and a bidding war will ensue. That rarely happens, though.
If the acquisition is for all cash and the market price of the target company rises to the premium offered so that there is little continued upside to holding the position, then you could sell now and put your cash to work elsewhere rather than letting the position stagnate until the deal closes.
If you own a position in the company being acquired and it’s an all or partial stock deal, then the question you should ask yourself is whether you want to hold a position in the acquiring company. If you have high conviction in its long term (3-5 years or longer) earnings growth potential, you may want to use this as an opportunity to establish a position in that company.
If you own a position in both the acquiring company and the company being acquired and it’s an all or partial stock deal, then the question you should ask yourself is whether you want to increase the size of your acquiring company position. If you feel you are underweight, you may want to use this as an opportunity to increase your position. However, if you feel you have a full or over-sized position, you may not want to make it larger. In the latter case, you could be justified in selling out of the target position and putting your cash to work elsewhere.
If you decide you do not want to hold onto the position of the company being acquired, there is really no upside to waiting. Once the market price rises towards the premium price offered, it will hit a ceiling. Why should the market bid up a share price beyond that which the acquiring company is willing to pay? So if you decide you have better opportunities elsewhere, you can cash out and put the money to work elsewhere.
Note that if you do decide to hold onto your position and allow the merger to be completed, it will likely take as little as one and more likely two quarters, though it can potentially take longer if it is a complicated transaction (The Disney acquisition of the entertainment assets of 21st Century Fox took 16 months).
Who notes if you wait until the merger closes, you will probably be charged a “reorganization” fee by your broker but if you sell a position on the open market and your broker has no trade fees, then you won’t have to pay anything…
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