Can unclear or deceptive company news and updates affect the stock price in the opposite direction of where the company is actually headed?
Yes, but only in a relatively short term. False news or speculations can definitely change the stock price, sometimes even significantly. However, the stock price will eventually (in the long-term) correct itself and head to the right direction.
You're right, things can get a little out of hand on Reddit. The prior post is gone now so I can't really remember, but the gist of what I meant earlier was that your logic didn't line up in that the price of a stock is indicative of it's value, but doesn't equate to it's value. The price is a combination of the perceived intrinsic valuation of the company as well as sentiment. The price can go up if people are buying but it doesn't necessarily mean the company's value or financial conditions are improving (though it can). It's a common trap to fall into, and can lead one to ignore for example revenues falling or other metrics deteriorating merely because the stock price continues up so it must be getting better and better.  Sorry, not a very coherent response, if you're unsure feel free to pm me Good points. It's not a completely new shift, as some equities are behaving as one would historically expect: $LMT just missed earnings and investors are responding appropriately. So while overall things seem somewhat strange, there are still classic signs of behavior. It depends on the timing of the events. Sometimes the buying company announces their intention but the other company doesn't like the deal. It can go back and forth several times, before the deal is finalized. The specifics of the deal determine what happens to the stock: The deal will specify when the cutoff is. Some people want the cash, others want the shares.  Some will speculate once the initial offer is announced where the final offer (if there is one) will end up. This can cause a spike in volume, and the price could go up or down. Regarding this particular deal I did find the following: http://www.prnewswire.com/news-releases/expedia-to-acquire-orbitz-worldwide-for-12-per-share-in-cash-300035187.html Additional Information and Where to Find It Orbitz intends to file with the SEC a proxy statement as well as other   relevant documents in connection with the proposed transaction with   Expedia. The definitive proxy statement will be sent or given to the   stockholders of Orbitz and will contain important information about   the proposed transaction and related matters. SECURITY HOLDERS ARE   URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT BECOMES AVAILABLE   AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY   AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL   CONTAIN IMPORTANT INFORMATION. The proxy statement and other relevant   materials (when they become available), and any other documents filed   by Expedia or Orbitz with the SEC, may be obtained free of charge at   the SEC's website, at www.sec.gov. In addition, security holders will   be able to obtain free copies of the proxy statement from Orbitz by   contacting Investor Relations by mail at ATTN: Corporate Secretary,   Orbitz Worldwide, Inc., 500 W. Madison Street, Suite 1000, Chicago,   Illinois 60661. This was not the point of confusion. I said that the dy increased and that this means the investment is performing fairly well being that we don't know the stage the company is in or anything about the health of the economy. He said with the given information the investment is performing poorly. This is where we disagreed. 1) Explicitly, how a company's share price in the secondary market affects the company's operations. (Simply: How does it matter to a company that its share price drops?) I have a vague idea of the answer, but I'd like to see someone cover it in detail.  2) Negative yield curves, or bonds/bills with negative yields  Thanks! Yes, there are very lucrative opportunities available by using financial news releases. A lot of times other people just aren't looking in less popular markets, or you may observe the news source before other people realize it, or may interpret the news differently than the other market participants. There is also the buy the rumor, sell the news mantra - for positive expected information (opposite for negative expected news), which results in a counterintuitive trading pattern. "As others have pointed out, there are often many factors that are contributing to a stock's movement other than the latest news.  In particular, the overall market sentiment and price movement very often is the primary driver in any stock's change on a given day.   But in this case, I'd say your anecdotal observation is correct: All else equal, announcements of layoffs tend to drive stock prices upwards. Here's why: To the public, layoffs are almost always a sign that a company is willing to do whatever is needed to fix an already known and serious problem. Mass layoffs are brutally hard decisions.  Even at companies that go through cycles of them pretty regularly, they're still painful every time.  There's a strong personal drain on the chain of executives that has to decide who loses their livelihood.  And even if you think most execs don't care (and I think you'd be wrong) it's still incredibly distracting.   The process takes many weeks, during which productivity plummets. And it's demoralizing to everyone when it happens. So companies very rarely do it until they think they have to.  By that point, they are likely struggling with some very publicly known problems - usually contracting (or negative) margins.   So, the market's view of the company at the time just before layoffs occur is almost always, ""this company has problems, but is unable or unwilling to solve them."".  Layoffs signal that both of those possibilities are incorrect.  They suggest that the company believes that layoffs will fix the problem, and that they're willing to make hard calls to do so. And that's why they usually drive prices up." Two reasons why I think that's irrelevant: First, if it was on 3/31/2012 (two other sources say it was actually 4/3/2012), why the big jump two trading days later? Second, the stock popped up from $3.10 to $4.11, then over the next several trading days fell right back to $3.12. If this were about the intrinsic value of the company, I'd expect the stock to retain some value. "It's called ""dilution"". Usually it is done to attract more investors, and yes - the existing share holders will get diluted and their share of ownership shrinks. As a shareholder you can affect the board decisions (depends on your stake of ownership), but usually you'll want to attract more investors to keep the company running, so not much you can do to avoid it. The initial investors/employees in a startup company are almost always diluted out. Look at what happened to Steve Jobs at Apple, as an example." There is a technique called the Elliott wave which explains these 'shocks'. The reversal directions you are questioning are part of the pattern, it is known as corrections. The Elliott wave is an indicator based on psychology of investors. Think about it this way, if you see a huge up trend what are you most likely to do, sell and make profit or continue, this is why there is a shock before it continues. Many people will sell to be safe, especially after hearing the bad news they won't risk it. By learning the Elliott wave you'll be able to make an educated decision on whether or not to stay or leave. Here are websites on the Elliott wave: http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory http://www.swing-trade-stocks.com/elliott-wave.html The Elliott wave is helpful in any time frame and works well with momentum. Hope this helps. Despite the fact that I think there is a litany of inaccuracies and misunderstandings related to quoted price and transaction price and the way prices move and assets transact; if you were able to, under these extremely narrow and very unlikely conditions, affect the prices of these assets that would be market manipulation in the eyes of the SEC. Link to the SEC page about market manipulation. Simple, there is no magic price adjustment after sales - why do you expect the stock price to change? The listed price of a stock is what someone was willing to pay for it in the last deal that was concluded. If any amount of stock changes ownership, this might have the effect that other people are willing to buy it for a higher price - or not. It is solely in the next buyer's decision what he is willing to pay. Example: if you think Apple stocks are worth 500$ a piece, and I buy a million of them, you might still think they are worth 500$. Or you might see this as a reason that they are worth 505$ now. according to me it's the news about a particular stock which makes people to buy or sell it mostly thus creates a fluctuation in price . It also dependents on the major stock holder. "What does it mean in terms of share price? Should the share price increase by 15 cents?  No, but you're on the right track. In theory, the price of a share reflects it's ""share"" of time discounted future earnings. To put it concretely, imagine a company consistently earning 15 cents a share every year and paying it all out as dividends. If you only paid 25 cents for it, you could earn five cents a share by just holding it for two years. If you imagine that stocks are priced assuming a holding period of 20 years or so, so we'd expect the stock to cost less than 3 dollars.  More accurately, the share price reflects expected future earnings. If everyone is assuming this company is growing earnings every quarter, an announcement will only confirm information people have already been trading based on. So if this 15 cents announcement is a surprise, then we'd expect the stock price to rise as a function of both the ""surprise"" in earnings, and how long we expect them to stay at this new profitability level before competition claws their earnings away. Concretely, if 5 cents a share of that announcement were ""earnings surprise,"" you'd expect it to rise somewhere around a dollar." The opening price is derived from new information received. It reflects the current state of the market. Opening Price Deviation (from Investopedia): Investor expectation can be changed by corporate announcements or   other events that make the news. Corporations typically make   news-worthy announcements that may have an effect on the stock price   after the market closes. Large-scale natural disasters or man-made   disasters such as wars or terrorist attacks that take place in the   afterhours may have similar effects on stock prices. When this   happens, some investors may attempt to either buy or sell securities   during the afterhours. Not all orders are executed during after-hours trading. The lack of   liquidity and the resulting wide spreads make market orders   unattractive to traders in after-hours trading. This results in a   large amount of limit or stop orders being placed at a price that is   different from the prior day’s closing price. Consequently, when the   market opens the next day, a substantial disparity in supply and   demand causes the open to veer away from the prior day’s close in the   direction that corresponds to the effect of the announcement, news or   event.