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One Tweet Cost Twitter $8 Billion

posted by CoolHand on Thursday April 30 2015, @06:58AM   
from the at-least-someone-tweets-something-that-matters dept.

GlennC writes:

Twitter was due to announce its earnings for the first quarter of the year after close of trading on the New York Stock Exchange, where the company is listed.

Except it turns out that somebody thought it would be a good idea to release this information early, on the technology-led NASDAQ run Investor Relations page for Twitter.

Initially it seemed no one really noticed the error, until a well-placed tweet highlighted the mistake and revealed Twitter's disappointing results.

http://www.bbc.com/news/technology-32511932

At one point in the final hours of trading, the stock had lost more than $8 BILLION.

• Re:Cost WHO 8 Billion? (Score: 4, Informative) by Non Sequor on Thursday April 30 2015, @09:18AM

  by Non Sequor (1005) on Thursday April 30 2015, @09:18AM (#177009) Journal

  Market prices are best described as a mixture of concrete valuations based on things such as

  • predictable dividends, if such a thing exists,
  • Price to Earnings ratios (how quickly does earnings accumulate a value that "pays back" the price) and other ratios with rules of thumb being used to account for good price ranges
  • value of the company's assets,
  • and comparable valuations with other companies (think like a house appraisal where you look at nearby houses with the same features and estimate the cost of the features for a given house).

  Modern economics and the accounting standards organizations in particular are currently aggressively pushing the idea that all of these different ways of looking at stock value should converge to the stock's current price. Any lack of convergence is viewed as "inefficiency" because they claim it does not reflect all of the information that investors have about how these valuations should be performed.

  The truth is that all of the valuations should be tied together with rubber bands. They can drift apart, but eventually that creates an opportunity for someone to make money by doing something that tightens the rubber bands. The idea that the rubber bands should be perfectly tight is a bit silly.

  Literal changes in the stock price are actually mediated through market makers. This is a bank or other institution that sits on an "inventory" of shares of the stock and they set a bid price and an asking price where the bid is lower than the ask. They protect themselves from the possibility that the price of their inventory changes underneath them by buying, selling, or "writing" options on the stock that zero out their profit or loss if the stock price changes. They move the bid and ask prices in response to people's actions. If people are buying and selling in equal volume, the price stays level, if there's a tilt in one direction, the price moves that way. (Note however that traditional marketmaking is essentially being replaced by HFT algorithms.)

  --
  Write your congressman. Tell him he sucks.

  Parent

  Starting Score:	1		point
  Moderation		+2
  Insightful=1, Informative=1, Total=2
  Extra 'Informative' Modifier		0
  Karma-Bonus Modifier		+1
  Total Score:		4