How does share price fluctuate before and after merger between banks?

"How does share price fluctuate before and after merger between banks?"
 This is the question that most of the people think they know and they want to believe that they are capable to predict how it actually moves. To some extent they are correct but what lies inside the real mechanism will blow your mind. The question itself suggest that people want to know what will be the price of the stocks after merger. The mechanism incorporates in itself various complex processes that is explained easily by experts.In this post we are going to see the pattern of stock price changes that occurs before and after merger of the bank. There is no middle part here because all the transaction of shares are halted during the process of merger.

Normally, when the process of the merger starts then all transactions of the shares of banks which are going into merger are halted. The transaction stops at the price currently prevailing then. That market price per share will be recorded as the last transaction price of the share. This last transaction price is taken as the base price while continue the trading of the stocks after the completion of the merger. This price is continued later and it is kept as the starting price of the stock after merger takes place and trading of the new bank takes place.

After the merger the magic starts to work. The combined capital investments, in some cases acquisitions provides high opportunity situation for the institution. There are various sectors and budgets after merger that  the bank can easily provide necessary capital. These all add up to an effective signalling effect. It works psychologically. People start to think that the bank will produce more profit. Those people who want to get profit from shares in bank will purchase the share of the bank. This creates demand. Other people who are witnessing the transaction in the stock market will see that more and more people are purchasing the stock of the bank which has gone into merger recently.

How long will the price hike continue?
It continues normally till people find other opportunities. Competitors are always there and if there is any possible reason for low purchase price for people then the price starts to deplete.