- The Finance Gourmet

Bank Merger Signals New Phase of Economy

February 7, 2019 by Finance Gourmet

OK, here we go. The first big bank merger (or acquisition) since 2008 was announced today. It is significant for several reasons. Banks Are Back? As the financial industry imploded in 2008, it took the banks with them. It also exposed a lot of their shadier practices and brought out new regulations and reporting requirements. As a result, banks were in no way ready for the kind of scrutiny markets, investors, and regulators would perform if they tried to merge or acquire one another. Today, two semi-major banks are merging to become one of the big boys. BB&T and SunTrust are merging. They are going to pick a new name, though they apparently don’t know what it is. Wall Street seems to approve of the deal. Bigger Banks Better? One of the reasons given for the merger is that being a bigger bank is better. The idea is that some of the costs associated with being a modern bank make being smaller less viable. That isn’t entirely true. A small bank, serving one, or a few, states is still a completely profitable and worthwhile venture. Where banks are getting stuck is that area between small, and big. There, it can …

Twitter Buyout Coming?

September 23, 2016 by Finance Gourmet

Today’s big news is rumors of a Twitter buyout. According to “sources,” whatever that means, Twitter is close to receiving a formal takeover offer. This makes Twitter the latest so-called business with a huge internet presents, but no way to make money, to be snapped up by another company that thinks that they know what Twitter doesn’t: how to make money. Twitter is, of course, a huge internet icon. Unlike Tumblr before, which never made a penny, and was inexplicably snapped up by Yahoo. Yahoo came to find out that Tumblr not making any money may not have been by choice. The company never reached anything even close to the modest $100 million goal set for it, and was eventually written down by Yahoo as essentially worth nothing, despite having paid $1 billion for it. See my Credit Check Total review. Which brings us to Twitter. Twitter does make some money. Twitter’s second quarter filing showed revenue of $602 million for the quarter, but a loss of $107 million. A little math shows that it costs over $700 million just to run Twitter each quarter. And, that may be where other companies think they can do better. Although Yahoo was naive to …

Why the Buying Company Stock Price Goes Down

May 23, 2013 by Finance Gourmet

The deal where Yahoo is buying Tumblr got me thinking about a question that I get asked whenever there is a big merger or buyout between companies. Often, when one company buys another company, the buying company’s stock price goes down in reaction to the news. Why does the acquiring company stock price go down so often? Stock Price Reaction to Buying Another Company Investor reaction to deal of Yahoo buying Tumblr was understandably muted. First, Tumblr is not a publicly traded company, so there is no way for its stock price to react at all. Second, at a reported price of $1 billion the acquisition isn’t exactly a blockbuster deal in terms of size. However, when one publicly traded company buys another, there is often an immediate dip in the share price of the acquiring company. Before we get started on exploring why the buying corporation’s stock goes down, it is important to remember that stocks do not trade in a vacuum. There are millions of people buying and selling stocks, with millions of different objectives, millions of different time frames, and millions of different investment philosophies. At any one time, any of those competing motivations can affect the price of a company’s stock. However, …