FundRobot » Fund Price » Can you explain this article from the WSJ?

Old   #1 (permalink)
Posts: 2,616
Default explain this article from the wsj

pretty interesting article you picked, if you ask me. I hope you didnt just pick it due to its length though. anyway...this article deal with the concept of acquititions. basically one company buys another company. Companies do this to eliminate a competitor, acquire a new technology/patent/infrastructure...really a ton of diferent reasons. And from what this article says, in the past, when a company bought another comapny, that purchasing company's stock price would fall. However, the current trend indicates that now, when a company buys another company the purchasing compan's sock price increases.

So to give you a "nudge" id suggust you look into why (in the past) a companys tock pice would decrease after an acquisition. Im sure you will have no problem finiding theories by numerous economists on this subject.

Then do the same thing and look at why (in today's world) does the stock price of a company increase after they acquire a company. I'll give you a hint that may help your research....companies can funnel their losses to newly acquired firms to make their financial statements appear stronger. I can also be the case that the pschology behind a firm having the funding to make a purchase and acquire addition technologies is favorable to investors because it shows financial strength.

Since you are in a basic micro class...i wouldnt focus on the specific details of this article. and what i mean is dont worry about the specific companies mentioned of the health care industry in which these companies are in. but focus on looking into the reason on WHY stock prices and now increasing when in the past they use to decrease when a firm acquired another firm.

Hope that helps!!
TvShows3 is offline   Reply With Quote
Old   #2 (permalink)
Posts: 2,584
Default explain this article from the wsj

Start at paragraph 2 (let's call it ¶2), skip ¶3 and go right to ¶4.
Then, read ¶1.
The last 2 ¶s could really be one 5-sentence-long paragraph. And by "both fronts", I think the author is referring to Forest Labs' win on its own in early January and its win by way of acquiring, last Friday.
ForexCash10 is offline   Reply With Quote


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