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AMD to go Private Sector - Page 2

post #11 of 21
Private equity firms propose either a leveraged buyout (a friendly takeover) to the board of directors, or a hostile takeover of the company by going straight to the shareholders offering a premium to the current stock price, and after gaining a controlling position, get rid of the board of directors and put their own cronies in those seats. In either case, once a majority of outstanding shares are obtained by the private equity firms, SEC rules and regualtions allow them to force any holdout shareholders to sell. It ususally doesn't have to go that far, because when they offer a premium to the current stock price, almost all of the shareholders jump on it.

The reason a company is taken private is typically to 'fix it', meaning correct any operational problems (too many employees, non-strategic lines of business, etc) with the intent of turning the company profitable, or making it more profitable than it already is. They then load debt onto the company's balance sheet, and use that capital to give themselves big fat dividends. Then it's time (a few years later) to take the company public again.
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post #12 of 21
how much do the premiums tend to be if they offer them?
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post #13 of 21
Thread Starter 
Quote:
Originally Posted by rx7350 View Post
Private equity firms propose either a leveraged buyout (a friendly takeover) to the board of directors, or a hostile takeover of the company by going straight to the shareholders offering a premium to the current stock price, and after gaining a controlling position, get rid of the board of directors and put their own cronies in those seats. In either case, once a majority of outstanding shares are obtained by the private equity firms, SEC rules and regualtions allow them to force any holdout shareholders to sell. It ususally doesn't have to go that far, because when they offer a premium to the current stock price, almost all of the shareholders jump on it.

The reason a company is taken private is typically to 'fix it', meaning correct any operational problems (too many employees, non-strategic lines of business, etc) with the intent of turning the company profitable, or making it more profitable than it already is. They then load debt onto the company's balance sheet, and use that capital to give themselves big fat dividends. Then it's time (a few years later) to take the company public again.
Now i understand. Thanks Rep to your Very informative post
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post #14 of 21
The premium offered depends on how bad (or good) the company's balance sheet is, the prospects for the company, how bad the private equity firms want it, etc. The premium (amount over the current prevailing stock price) offered is typically in the 20-30% range, but I've seen anywhere from parity (0%) to 100%.

A lot of companies are being taken private right now, because interest rates are so low (.5% in Japan) that these private equity firms have access to tens of billions to do the deals. The world is awash in cash, looking for a place to call home. Another use for all of this cheap capital is that companies are borrowing $$ to buy back their own shares, in effect taking a part of their own company private. This is a desired activity because the same amount of company earninings divided by less shares mean an increased earnings per share, and if there's anything that will drive a stock price higher it's the expectation of increasing earnings per share.
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post #15 of 21
Might be wise!
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post #16 of 21
this still doesnt make much sense for amd to go private. with such a small profit margin it seems like amd is just putting all its eggs in one basket. instead of diversifying the risk that further drop in stock price (due to maybe barcelona or restructuring, who knows) to many shareholders, they would rather take it all on themselves?

i duno, either amd has one kick ass chip coming out or theyre mighty nice ppl....
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post #17 of 21
Quote:
Originally Posted by sladesurfer View Post
Now why would you buy a stock without researching the company?? Im pretty sure they know who AMD is.
-thats what I was thinking.


I REALLY doubt that AMD would change and become a private joint stock company though..

seems highly unlikely, especially now.
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post #18 of 21
Quote:
Originally Posted by Grim View Post
-thats what I was thinking.


I REALLY doubt that AMD would change and become a private joint stock company though..

seems highly unlikely, especially now.
People buy stock all the time on there brokers recommendation. This would make alot of people panic, people who do not know who AMD is.
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post #19 of 21
did you seriously mean buy or short. LOL
    
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post #20 of 21
Here is an article about a month old that talks already about it. And AMD didn't deny.
http://www.investors.com/editorial/I...issue=20070502

However, it seems that the problem might be to find a willing investor, given AMD's poor cash position.

PS: It is 'going private' and NOT 'going private sector'
    
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