Go Private explained: What is it? How does it work? What will happen to the stock you own? How will it affect the current stock price?
1.1. What is Go Private?In contrast to IPO where a private company goes public, going private happens when a public company is converted to a private company. A set of transactions that converts a publicly traded firm into a private organization is referred to as going private. When a corporation goes private, its stockholders' shares can no longer be traded on the open market.
1.2. How does it work?To go private, a public company must hold a special election in which institutional and ordinary investors can vote. When a firm becomes private (for whatever reason), it will buy out all outstanding shares at a predetermined price. Shareholders who possess shares at the time it becomes private will receive cash based on the agreed-upon rate.
1.3. What will happen to the stock that I own if the company goes private?
The announcement for going private is usually conducted before the process is completed. Cash payments for outstanding shares will be automatically done once the company is legally privatized. The cash value of an investor's position is recorded in the brokerage account in which the investment was held.
1.4. How will it affect the current stock market price?Investors can still purchase stock after the company announces going-private, as long as it has not formally gone private, but investors should carefully analyze the effect before doing so. Do consider the monetary value offered by the corporation in exchange for shares versus the stock's current market value. If the current market price is lower than the specified value, then investors will likely make a profit.