One will never truly master the art of stock investing until he invested in his first stock. After which, frequent monitoring of the company’s news and announcements will be a good habit since they tend to have an impact the price of the stock.
Below are some of the more common company’s activity that you might have come across while reading up on news of a certain company. Below is their impact on the stock price.
Firing Of CEO Or Company Executive
The move to let go of someone with a huge responsibility in the business is usually seen as a bold move by the board of directors of the company. This might be an opportunity for a change in management which may possibly lead to the company doing better.
There is, however, a concern with the firing of someone from the top management. The problem may run deep in the company which may lead to more bad news.
Hence, the stock price could go up or down after such announcement depending on the situation.
Read also: 4 Forces That Move A Stock Price
Merger And Acquisition
When a firm is getting acquired, the stock prices of it will tend to go up. This is due to the acquiring company having to pay a premium for acquiring the target company.
The stocks for acquiring the company on the other hand usually goes down. This may be due to them having to pay more than the target company’s worth in form of premium in order to acquire it. On top of that, the uncertainty revolving around the company increases as investors cast doubts on the ability for both companies to integrate.
Laying Off Of Employees
To have employees being laid off in a company is usually seen as bad news reducing consumer trust in the future of a company and result in less-valuable stock
The context of a layoff may differ in a slowing economy. Laying off of employees is one of the fastest ways for the company to reduce expenses. If this is coupled with a slowing economy, it means that the company might be adapting themselves to the situation. Hence, the stock price of the company for such instances tend to do well.
Allegations Of Fraud Or Negligence
Any allegations of fraud or negligence will never be favourable to any company. It greatly reduces investors’ confidence in the accountability of the particular company.
Insider trading and fraud have a negative impact on the markets. To make things worse, more often than not, such activities can result in unusual price movement which can lead to a trading halt. This largely increases the risk of investors who have invested in the stock.