Google announced that it is in talks to buy Fitbit. This sent the shares of Fitbit soaring from an open of $4.29 up to $5.74 a 34% rise midday today 10/28/2019. This is known as an acquisition or takeover. If it is between two companies and the merger is agreed too by all parties such as Exxon & Mobile or AT&T & T-Mobile then it is amicable. If however the company being purchased (in this case Fitbit) does not want to be purchased then it is a hostile takeover. What Google would need too do is to buy up the outstanding shares in the market and try to obtain 51% of the voting shares of Fitbit in order to acquire Fitbit.
If you owned the stock prior to today's announcement, I would sell and reap in the profits even though at the current time we do not know what the offer will be by Google for Fitbit. There could still be a large potential upside in the stock it could rise to $10 or $12 dollars a share who knows until the actual deal is negotiated.
This is a time of complete speculation so therefore for our purposes in maintaining a conservative portfolio I would stay out of trying to buy the stock at this time the entire amount of the deal may already be reflected in the stock price if it turns out to be only $5 a share and speculators today ran the price up to $5.74 then they would loss money. Another reason I would stay out is that in the end Google and Fitbit may never come to an agreement on the purchase and the entire deal falls through. More than likely though the deal will actually go through if the price is right.
Remember as a novice investor it is easy to want to try to jump in and get the quick buck as your brother-in-law is doing with BitCoin but our current portfolio is already at a staggering 111% return (see previous articles) why try to get a quick fix now.
So where do we stand, if you own Fitbit get out now take the profit regardless if the price in the end went to $10 a share you lock in your profit. If the deal actually falls through and the price plummets. In the meantime you can now invest in something new or leave in your brokerage accounts money market to make interest. If you do not own Fitbit, stay away chances are the price is already figured into the price of the merger deal.
Mergers & Acquisitions happen all the time on Wall Street by following the news articles on the individual companies you can sometimes find out if the company is putting itself out to be bought or what companies might be trying to acquire a company to diversify there holdings. The same way we are diversifying our mock portfolio so all our eggs are not in one basket so to speak.
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