What happens if a company you hold short merges with another company?
"I don't have anything definitive, but in general positions in a company are not affected materially by what is called a corporate action. ""Corp Actions"" can really be anything that affects the details of a stock. Common examples are a ticker change, or exchange change, IPO (ie a new ticker), doing a split, or merging with another ticker. All of these events do not change the total value of people's positions. If a stock splits, you might have more shares, but they are worth less per share. A merger is quite similar to a split. The old company's stock is converted two the new companies stock at some ratio (ie 10 shares become 1 share) and then converted 1-to-1 to the new symbol. Shorting a stock that splits is no different. You shorted 10 shares, but after the split those are now 100 shares, when you exit the position you have to deliver back 100 ""new"" shares, though dollar-for-dollar they are the same total value. I don't see why a merger would affect your short position. The only difference is you are now shorting a different company, so when you exit the position you'll have to deliver shares of the new company back to the brokerage where you ""borrowed"" the shares you shorted."
1) What's the point of paying a dividend if the stock price   automatically decreases? Don't the shareholders just break even? When the company earns cash beyond what is needed for expenses, the value of the firm increases. As a shareholder, you own a piece of that increased value as soon as the company earns it. When the dividend is paid, the value of the firm decreases, but you break even on the dividend transaction. The benefit to you in holding the company's shares is the continually increasing value, whether paid out to you, or retained. Be careful not to confuse the value of the firm with the stock price. The stock price is ever-changing, in the short-term driven mostly by investor emotion. Over the long term, by far the largest effect on stock price is earnings. Take an extreme, and simplistic example. The company never grows or shrinks, earnings are always the same, there is no inflation :) , and they pay everything out in dividends. By the reasoning above, the firm value never changes, so over the long-term the stock price will never change, but you still get your quarterly dividends. &gt; will end up over taking instagram AND facebook in the next 5-10 years.   holy shit LMAO I wish there was some way I could bet everything I own against this statement. Facebook will not be overtaken by ANY other social media company for the next 10+ years, and will NEVER be overtaken by snap inc. Facebook is actually the smartest long term investment out of everything you mentioned (and amazon as well). Snapchat and gopro are horrible long term holdings. Gopro will be worth half of what it is worth now in the next 5 years. The money you are bragging about is peanuts, and irrelevant. Because you were talking about long term holdings in your first reply, and now you are bringing up day trading which is a completely different story. Yes snap is probably good for some short term gains, but I dont see how you are parlaying that into thinking that is good for long term retirement funds.  FWIW making money in this climate is easy as fuck, it wont be like this forever. And when the markets begin to crash, companies like twitter and snap inc who have no revenue will be the first ones to freefall to nothing. I have a 37% annual return since 2009 (entered the market a great time) and I have no background in investing before that. So dont get a big head about making correct choices in the short term. Merging?  If anything the opposite is happening.  Oil companies are moving in the opposite direction, separating their upstream (extraction) and downstream (refining) aspects.  ConoccoPhillips just did this and others will follow.  Refining isn't very profitable and involves lots of danger, red tape and headaches.    I look forward to the people who complained about the evils of mergers and vertical integration now complaining about how spinnoffs are the new evilest thing ever. "First, keep in mind that there are generally 2 ways to buy a corporation's shares: You can buy a share directly from the corporation. This does not happen often; it usually happens at the Initial Public Offering [the first time the company becomes ""public"" where anyone with access to the stock exchange can become a part-owner], plus maybe a few more times during the corporations existence. In this case, the corporation is offering new ownership in exchange for a price set the corporation (or a broker hired by the corporation).  The price used for a public offering is the highest amount that the company believes it can get - this is a very complicated field, and involves many different methods of evaluating what the company should be worth. If the company sets the price too low, then they have missed out on possible value which would be earned by the previous, private shareholders (they would have gotten the same share % of a corporation which would now have more cash to spend, because of increased money paid by new shareholders). If the company sets the price too high, then the share subscription might only be partially filled, so there might not be enough cash to do what the company wanted. You can buy a share from another shareholder. This is more common - when you see the company's share price on the stock exchange, it is this type of transaction - buying out other current shareholders. The price here is simply set based on what current owners are willing to sell at. The ""Bid Price"" listed by an exchange is the current highest bid that a purchaser is offering for a single share. The ""Ask Price"" is the current lowest offer that a seller is offering to sell a single share they currently own. When the bid price = the ask price, a share transaction happens, and the most recent stock price changes." Absolutely nothing, and it's not their call to make.  The shareholders will want to cut it into as many parts as they  can sell to recoup some of their lost investment. The judge will demand it even if they suddenly had a moral thought.  This will happen when this (and all those other companies) go under, refocuses priorities, or shuts down departments. My understanding was that if a company buys back shares then those shares are 'extinguished' I.e. the rest of the shareholders now own a greater portion of the company. However, if there is only one share left, then the company could not buy it because doing so would extinguish it leaving the company without an owner. That result would run contrary to the requirements for an incorporated company in countries like NZ and Australia. In theory you can buy shares directly from someone else who owns them. In practise, if the stock is listed on an exchange, they are unlikely to own them directly, they are likely to own them through an intermediary. You will have to pay fees to that intermediary to transfer the shares to your name. There are thousands of small companies owned by the guy who started it and a few other investors. You can buy stock in that kind of company directly from the existing owners, as long as they are willing to sell you some. It's a super-high risk investment strategy, though. This is the kind of deal that happens on Dragons Den. "What will happen if the stock price just continues to decline?  Nothing. What would happen if folks just stop trading it? Nothing. What if the company goes private? Then they will have to buy you out based on some agreed upon price, as voted by the board and (potentially) approved by the shareholders. Depending on the corporation charter, the board may not be required to seek the shareholders' approval, but if the price the board agreed upon is unreasonable you can sue and prevent the transaction. How do they decide the fair value of the outstanding stocks? Through a process called ""valuation"", there are accounting firms which specialize in this area of public accounting."