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What happens to current shareholders in that situation?

You will be offered a fair price for your shares. It is usually up to your board of directors to negotiate a good price for the existing shareholders. Sometimes you get offered shares in the new company, but as yours is being taken private, in this case you will be offered cash.

You don't have to take the offer, but as noted before, usually you will want to accept the offer unless you think there will be a bidding war resulting in a better offer later.

In a 401K, the transaction should be tax free. So you will be free to reinvest the funds in any of the other investment choices in the plan. But another aspect is that the new owner may modify the 401K plan. That can give you the chance to roll your 401k into an IRA, where you have more control of investment choices. Your 401k can also be frozen for several months while the transfer is made. So plan ahead and make any adjustments to wait it out if necessary.
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