In the capital market, there are no mergers and acquisitions without reason, nor are there any interest reshaping without reason. When the controlling rights of listed companies change hands, the fate of shareholders will also be reshuffled. Some are happy, holding huge premiums; some are sad, and their voice is instantly weakened; and some are quietly laying out behind the scenes, waiting for opportunities brought by new rules.
But the question is-how are the interests of shareholders redistributed after the acquisition of controlling rights? Will small shareholders be marginalized? Can major shareholders really have the last laugh? Today, Goheal will take you to decipher the shareholder game behind the capital chess game.
Who is the ultimate winner when the controlling rights change hands?
In the world of mergers and acquisitions, there are no absolute winners, only smarter players. The acquisition of controlling rights is not just as simple as buying and selling stocks, but involves the redistribution of multiple rights and interests such as corporate management rights, board control rights, and profit distribution rights.
Winner 1: The "golden parachute" of old shareholders
When a company is acquired, the original major shareholders usually sell their shares at a premium above the market price and get rich returns. This is called the "golden parachute" effect, and it is also the core incentive for many founders to give up control.
Case: SoftBank sells Alibaba shares and makes $100 billion
As an early investor in Alibaba, SoftBank has reduced its holdings in Alibaba in various ways over the past few years. For example, in early 2023, SoftBank sold about $7.2 billion of Alibaba shares through prepaid forward contracts and cashed out about HK$193.3 billion (about RMB 160 billion) in the past year. Through these measures, SoftBank has achieved a considerable return on investment, but it is not entirely based on the motivation of cashing out at a high market level.
Winner 2: The power feast of the new major shareholder
Acquirers are usually not satisfied with the simple "spending money to buy shares". They are more concerned about the actual implementation of control, including the right to speak on the board of directors, the right to adjust business and the right to capital operation. Once the acquisition is completed, the new major shareholder will quickly adjust the board of directors to ensure that their strategic will can be smoothly implemented.
Winner 3: Patient arbitrageurs
Before and after the acquisition of controlling rights, some savvy investors will make arrangements in advance through market intelligence, and use stock price fluctuations to arbitrage after the acquisition news comes out. For example, after the news of the merger and acquisition comes out, the target company's stock price tends to rise sharply, while the buyer company's stock price may fall. Arbitrageurs will take advantage of the short-term irrational fluctuations of the market to make huge profits.
Goheal reminds:
1. There is no fixed script in the M&A market, and the winners are often those who are good at perceiving market sentiment and capital operation rules.
2. For ordinary investors, understanding the distribution of benefits after the acquisition of controlling rights can gain a firm foothold in the capital market.
How to protect the rights of small shareholders after the change of controlling rights?
If you are a small shareholder of a listed company, will your rights be affected after the change of controlling rights? The answer is possible, but there are also many coping strategies.
Two fates of small shareholders: marginalization or protection?
1. Marginalization risk-if the new major shareholder tends to take over the company forcefully, the decision-making power of small shareholders may be weakened, and they may even face unfavorable equity adjustments.
2. Protected mechanism - If a listed company has minority shareholder protection clauses in the acquisition agreement (such as "minority shareholder interest protection mechanism"), then minority shareholders can still protect their own rights and interests through voting rights and legal proceedings.
Case: Tesla's privatization failed, the victory of minority shareholders
In 2018, Elon Musk planned to privatize Tesla and proposed to repurchase shares at a price of $420 per share. This move was strongly opposed by minority shareholders, who were worried about losing the long-term growth opportunities of the stock. In the end, due to regulatory and funding issues, the privatization plan was abandoned, and minority shareholders successfully protected their rights and interests.
Goheal's point of view:
1. Pay close attention to the terms of the acquisition agreement to avoid dilution of your own rights and interests.
2. Use shareholders' meetings and legal means to safeguard your voting rights and dividend rights.
3. If the company has obvious governance risks, minority shareholders can consider reducing their holdings in a timely manner to avoid potential losses.
After the acquisition of controlling rights, how do shareholders divide the cake?
After the change of controlling rights, the company's profit distribution mechanism may undergo major adjustments, which will directly affect the returns of shareholders.
Adjustment of dividend policy
1. High premium acquisition, cash shortage - if the buyer paid a high premium for the acquisition, they may cut dividends to maintain cash flow.
2. Business transformation period, priority investment - the new major shareholder may choose to reduce dividends and use profits for corporate expansion or new business layout.
3. Financial optimization, improve shareholder returns - some acquirers will adjust the financial structure and improve shareholder returns through dividend repurchase and other means.
Case: Changes in dividend policy after Walmart acquired Flipkart
In 2018, Walmart spent $16 billion to acquire Indian e-commerce giant Flipkart and became the largest shareholder. After the acquisition, Walmart invested a lot of money in Flipkart's market expansion instead of paying dividends to shareholders. This made some investors who expected cash returns dissatisfied, but in the long run, this strategy helped Flipkart grab more market share.
Redistribution of shareholder interests, who is the ultimate winner of the capital game?
The acquisition of controlling rights is not only a fight for corporate control, but also a reshuffle of interests. Major shareholders, minority shareholders, arbitrageurs, each role has different interests, and the ultimate winners are often those who can see through the market rules and plan ahead.
So, which acquisition of controlling rights in history do you think has the fairest distribution of shareholders' interests? Which merger and acquisition has caused small shareholders to suffer a big loss? Welcome to leave a message in the comment area to discuss!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions. It is deeply engaged in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
