What happens to your stock if a company is bought out or buys another company?

Many first-time investors may be surprised when they open their trading accounts and find that their shares were transferred to something. But this is what happens to stock when a company is bought.

Typically, if a company is bought out or purchases another company, the stock will see a dramatic increase in share price (most of the time).

You can choose to sell your shares on the exchange if it is an all-cash agreement. Or, if it is an all-stock deal, the shares will be replaced by shares of the company who initiate the purchase.

Regarding the transaction you cite, this is a great deal for Battle North Gold because Evolution operates mines in the United States and other parts of the globe.

Evolution shares could be a good opportunity, too, since it is trading at a 52-week low and returning a 3.41% dividend yield.

The stock price of the acquiring company typically dips temporarily while the target company's stock price soars.

This is because the acquiring company's share price drops when it pays a premium for the target company or incurs debt to finance the acquisition.

The target company's share price spikes because their shareholders only agree to sell if paid more than their company is currently worth.

This pattern holds over the long haul, and an acquisition tends to boost a company's stock price in the long run.