What Is a take-private Transaction?
It's exactly what it sounds like.
But we're going to break it all down.
Let's start with what you're all familiar with.
You trade stocks in the open market. You never think twice about who you're going to sell to or buy from. You're just transacting and waiting for market prices to rise when you want to sell and fall when you want to buy.
But what if a massive buyer approaches a company that you hold stock in, and says we 'we want to buy all shares outstanding.'?
You might be pretty thrilled. Well, that depends on the price you get.
In a take-private, a buyer buys all or most shares of a company on the public market. Now, the company that was bought is private. It's no longer publicly traded.
Often, it's a private equity firm or it's management of the company extending the offer. But in order to buy a public company, potentially a huge one, the buyer needs a lot of money. Well, it uses a lot of debt, meaning it borrows against much of the transaction and only puts up a small amount of its own capital.
Now to see what would make this type of transactions a money-maker for you, watch the video above.
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