CFD/Takeovers

[X888]

How does CFD and Takeovers work ?

Example :

I own Company B.

If Company A is taking over Company B and is offering $1 + 10 Shares in Company A per Company B share.

What will happen ?

Will I get the $1 ?

 

[monkey187]

yes.

you will be rewarded with cash and/or shares equal to the value of the real takeover.

 

[X888]

If a company goes bankrupt or whatever where your cash is locked in and cannot get out.

Who takes the loss since the full amount will be lost?

 

[monkey187]

if a company goes bankcrupt and trading freezes - your position is also frozen (ie you cant sell or buy CFDs in that stock).

If the stock is then taken off the market due to bankrupcy or reopens 99% lower than when it was frozen you take the loss as you hold the position.

In an ideal world - the CFD broker will actually purchase the shares you request to hedge the trade - thus they are subject to any movements in the price - they pass these movements on to you. If the company goes bankcrupt, they will lose their money they invested in the shares, dont think they wont pass those losses onto you.