It's not unusual for one company to buy out another company. After the acquiring firm has taken over the target company, the shares of the target company might not be traded anymore. If you happen to own shares in a company that is bought out, don't worry. You will still be able to sell the shares for their full market value.
Buyouts and Mergers
Sometimes a firm will acquire controlling interest in another company by purchasing 50 percent or more of the outstanding shares of the target company. The shares of the target company continue to be traded on the stock market. In this case, you can sell your shares by placing a sell order with your broker, just as you normally would do. Other times, the two firms are merged and the shares of the target company are no longer traded on the market. Instead, the acquiring company issues new shares to replace the outstanding shares of the target firm.
Book Entry Shares
You might be holding your stock in a company that has been bought out in "book entry" form. This means your shares exist as credits to your brokerage account, which is called "street registration." Alternatively, you may have an account with the company's transfer agent. These are also book entry shares. The transfer agent is a third-party firm that handles stock transactions for a company. Either way, if your stock consists of book entry shares, they will automatically be swapped out for newly issued shares from the acquiring firm. As soon as your account is credited with the new shares, all you have to do is instruct the transfer agent or broker to sell the shares.
If you own paper stock certificates in a company that has been bought out, you must transfer ownership and send the certificates to the transfer agent. The transfer agent then issues new shares. The new shares may be credited to an account you open with the transfer agent, or you can have them sent to you as new paper stock certificates. You can locate contact information for the transfer agent by visiting the company's investor relations website. The first thing you must do is obtain a transfer of ownership form. You can usually download and print this form from the transfer agent's website. Otherwise, you will need to request the form from the agent.
Fill out the transfer of ownership form and the form on the back of each stock certificate, but don't sign them yet. Take them to a bank, credit union, brokerage firm or other financial institution authorized to issue a medallion signature guarantee. A signature guarantee verifies you are the owner of the shares. Sign the forms in the presence of the financial institution's authorized official. Don't take the forms to a notary public to witness your signature. Transfer agents won't accept a notary's seal in place of the signature guarantee, except for a small number of shares. Send the transfer of ownership form and the stock certificates to the transfer agent. Once your account is credited with the replacement shares, place a sell order with the transfer agent.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.