Learn the stock market › How listed companies work › Lesson 7 of 8
What happens to a stock in a takeover?
How it works
There are two common routes. In a tender offer, the buyer asks each shareholder directly to sell at a fixed price for a limited time. The SEC notes that the price is usually above the market, to encourage owners to sell, and that an offer can depend on enough shares being tendered. In a merger, the shareholders vote, and if the deal is approved, it applies to everyone's shares.
The price can be paid in cash or in the buyer's own shares.
The premium
The gap to the market price is called the premium. This is a made-up case.
| Step | Amount |
|---|---|
| Last price before the bid | $40.00 |
| Bid per share | $52.00 |
| Premium | +30.0% |
| Difference on 100 shares | $1,200 |
The price usually jumps when a bid is announced, but most often not all the way to the bid. The remaining gap reflects that the deal may not happen, and that it can take a long time.
A real case: Activision Blizzard
In January 2022, Microsoft announced that it would buy Activision Blizzard for $95.00 per share in cash, a deal valued at $68.7 billion. Activision's proxy statement says the price was a premium of about 45% to the share price on January 14, 2022, the last trading day before the announcement. Its shareholders approved the deal at a special meeting in April 2022.
After the deal
An owner who does nothing in a merger gets the deal's terms when it closes. The shares usually stop trading, and the company leaves the exchange. What being delisted means in other cases is in the lesson on bankruptcy and delisting.
Test yourself
A stock trades at $80 and a bid comes in at $100. What is the premium?
Sources
- US Securities and Exchange Commission, Tender Offer, read on 5 November 2026.
- Microsoft, Microsoft to acquire Activision Blizzard, read on 5 November 2026.
- Activision Blizzard, proxy statement, 2022, and proxy statement, 2023, read on 5 November 2026.