Acquisitions with shares | Stocks and bonds | Finance & Capital Markets | Khan Academy

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What I want to do in this video is try to understand

how one company can buy another company

or could merge it with another company by using its stock.

So we have a situation here, where Company A

is acquiring Company B for $60,000,000 in A's shares

and what we'll see is,

it's not going to exactly be $60,000,000.

It'll depend on where Company A's shares trade.

Right now, they're trading at $30 a share.

So in order to make this transaction happen in A's shares,

what would happen is, is that A says,

"Look, I need to raise the equivalent of $60,000,000"

"in shares." or "I need to create the equivalent of"

"$60,000,000 in shares."

"If each of my shares right now on the market"

"are worth $30 a share, then I can do that by"

"creating or issuing 2,000,000 shares."

So Company A here is going to create another

2,000,000 shares. They're going to create another

2,000,000 shares and if they wanted to do it as a

cash transaction, they could take these shares and sell them