if company A will buy company b:
suppose:
A: $share: 50 million, B: 20million
current stock price: A: 30.5, B: 20
net income: A: 80, B: 22
if A issue stock to buy company B at B’s market price which is 20. what will be A’s stock price after the merger:
is it:
A will issue: 20*20/30.5=13.11 million share
and A stock price after the merger will be:
(50*30.5+20*20)/(13.11+50)=30.5
the stock price is not change, how could P/E be higher for A? (bootstrap effect)….
before merger, A’s P/E ratio is 19.1, after the merger A’s P/E is 18.87, it dropped….
suppose:
A: $share: 50 million, B: 20million
current stock price: A: 30.5, B: 20
net income: A: 80, B: 22
if A issue stock to buy company B at B’s market price which is 20. what will be A’s stock price after the merger:
is it:
A will issue: 20*20/30.5=13.11 million share
and A stock price after the merger will be:
(50*30.5+20*20)/(13.11+50)=30.5
the stock price is not change, how could P/E be higher for A? (bootstrap effect)….
before merger, A’s P/E ratio is 19.1, after the merger A’s P/E is 18.87, it dropped….