2 ms·
> The market cap of the company decreases by the amount of the fine (plus any predicted future effect of the lost money) and the stock price goes down to reflec
by jjav 3y ago
> The market cap of the company decreases by the amount of the fine (plus any predicted future effect of the lost money) and the stock price goes down to reflect that.
Purely in theory in a vacuum, yes. In practice, you'll have a very hard time finding examples where that actually happened. At best, the stock takes a momentary dip and next ~week it's back to where it was.
- crazygringo 3y agoWell in reality it's a gradual decrease over time as the fine moves from hypothetical low-probability to actually happening. By the time the fine happens it's often already been "priced in". But so what if the stock is back up the following week? More things happened over the following week. You're missing the fact that it would have been up even higher if it weren't for the fine. (Alternatively, the stock also might go down even further the following week. But similarly, it wouldn't have gone down as much if not for the fine.) This is not theory, this is how stocks actually work in the aggregate. If they didn't, you'd be able to make a lot of easy money off the stock market otherwise.