Confused about one thing and hopefully someone knowledgeable can answer this
This is just a hypothetical and has no base in facts. Lets say Lilly offer 19 per share and 2 Aria shares for 1 Lilly share. How exactly would something like this work?. Say you have a 1000 shares. I understand the part where your brokerage firm will change the symbol to Lilly and your 1000 shares become 500 but the thing I am confused about is when do you get the $19 per share?. Who sends it?.How do you get it?. Do you get up one morning and you see your brokerage account has an extra 19000 dollars and your symbol and share amount has changed?.
Stock Swap prices are already figured when the ratio is given. In the research I've done, if Lilly is planning to give a 1 for 2 swap then the current ARIA share price doesn't matter (everyone behind the negotiations has already determined the share value of ARIA for the swap). Here's how it would work for a stockholder's shares. If you owned 2,000 shares of ARIA, when the swap date went into affect, you would now have 1,000 shares of Lilly at it's current share price. ARIA would then be cancelled and all shares would be Lilly (1,000 shares x $50/share = $5,000 or whatever the current share price is or has been valued). This would all be completed in and through your brokerage account. I'm not clear on how the cost basis would work for tax purposes but we could assume whatever the total purchase cost was, it will be what shows in the cost basis for your current shares. Also, I'm not sure how call options will work in this situation. What I've read so far is you may exercise your options (at the current contract price) and take on the swap but if you don't have the money to purchase shares, you may be able to use the new shares (at the now new share price) in your account to swap for the option shares at the existing option purchase value. Let's say you have a 100 share call contract at $10/share price = $1,000. You would need $1,000 to purchase those shares. It looks like if you can swap, you could use 20 of the current Lilly shares to swap for the 100 shares of the option contract ($1,000/$50 = 20 shares at the current share price - not sure if this would mean a 2 for 1 swap now but would assume that too). Again, I'm unclear of the option situation. Please do not take my word for it and for sure do your own DD to make sure you base decisions accordingly. If this is indeed a Stock Swap situation, I would be extremely ecstatic and we would definitely all be winners. IMHO -B-