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The deal was stock and cash, so it is pretty much impossible to judge how good a deal this was for Dropbox[1]. Stock is a very cheap way for a company to acquire another.

[1] http://techcrunch.com/2013/03/15/mailbox-cost-dropbox-around...



"Stock is a very cheap way for a company to acquire another."

Not exactly. Could be the other way round too. It depends on whether the stock of the company is worth more or less than cash in the long run.


Yes.

Except since it is the company issuing stock in itself you can't really think of it as fungible. If it ends up being worth more than the strike price then literally one of the events that led to that price was the purchase stock being issued. Of course that doesn't mean the is a causal link, but in a very real sense the stock was free for the company itself.

The only cost to the company is opportunity cost.


"in a very real sense the stock was free for the company itself"

Stock always has value, especially to management.

Unless the company has poor self-esteem. :)

The reason so many technology companies today make acquisitions using stock is because they (correctly) understand their stock to be inflated, relative to intrinsic value. If that were not the case, if they understood their stock to be undervalued, then they would definitely not be giving it away in transactions. They would be making all-cash offers instead.




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