Investment - What dictates the stock price of "Company A" when it is purchased by another company?

For example, say the price of "Company A " stock price is at $50/share and "Company B" offers to purchase "Company A" at $55/share. Will the stock go higher than $55? Then lets say another company offers $60/share for "Copany A". Is there a limit to how high the stock can go and what dictates the final price of the stock if "Company A" is bought out?

The stock might very well trade above $55 after Company B's bid for the very reason you cite, someone else might come along and bid more.

Theoretically, there's no limit to how high it might go.

The final price will be the ultimate high bid.

Stock prices move based on supply and demand and on the fact that there is a limited number of shares available for trading.

When Company B offers $55 a share, the price will usually run up to $55 because other investors will purchase the stock up to $54.99 - trying to make a $0.01 to $5.00 profit on the buy-out. The stock can go higher than $55, but most investors would never pay $55.50 for a stock that is about to be bought out for $55.

There is no limit as to how high the price can go; but, the company that is buying Company A knows how much they want to pay and will not offer more than their preferred price.

The final price is determined by how many shares the purchasing company can buy - at what price. If Company B can not acquire 51% of Company A at $55 a share because the shareholders don't agree or because nobody is selling, Company A will have to keep buying. This would push the stock price higher until Company B has a majority ownership.

In practice, Company B will usually make a "tender offer" to buy Company A at, say, $55 a share. Company A will put it to a shareholder vote. If the shareholders agree, the transaction is done at $55 a share - regardless of the actual stock price. Company B acquires Company A and Company A shareholders receive a check for $55 x the number of shares they held, or they receive shares in Company B.