Krab,
These are precisely my concerns. Why must we be in the dark while the institutional and inside stockholders play around with the stock price like little children. In this case, the situation apparently centered around two hopefully ill-founded rumors. The PWAV situation certainly took a while to hit home. Only 1,900 shares traded in the first hour, which is extremely low. The LG news release was issued last night, so analysts had all night to think about it. I guess some rumormonger played connect the dots with the analysts at around 9:30 AM and in addition concocted the SPCT is going to fall short of earnings estimates story to play on the currently prevalent earnings worries (post-ASND, AMD, TQNT, etc.). This strategy has worked well with CYMI (which keeps claiming that its earnings are fine, to no avail) and SPCT was a ripe target ignoring the fact that management had only recently stated otherwise. Why is this happening? I hate to claim market manipulation, but this is probably the easiest way to manipulate markets. Unlike the options expiration conspiracy theories which involve the collusion of numerous market-makers with differing motives, the causing of a stock panic is easily accomplished. A single influential analyst or even broker can plant the rumor seed and it will spread its roots all over the investment community (see the movie Wall Street for an example)in a flash. Once a panic reaches the public without any apparent reason, fear of the unknown takes over among individual investors. The only thing that can stop the freight train at that point is the company involved. If the company acts like CYMI and does not respond very quickly, the panic can go on for several days (CYMI has gotten better on secondary panics). If the company does not react at all like ASND, the rumors are probably true.
Obviously, analysts and brokers are entitled to their rumors and to dispense them to whoever they like. Therefore, the only remedy to manipulation like this is for the companies involved to squash the rumors quickly. I've got to believe that SPCT knew the reasons behind this panic very early on (just ask an analyst) and could have easily put out a press release saying "hogwash." Instead they waited until after-hours to hold a conference call (of which we are lucky to know any details).
A secondary culprit in all of this is the financial press. They have got to be the sorriest bunch of journalists around. How can you have stocks with such high volumes and large price movements and not be able to ferret out the cause (again, just ask an analyst or trader - two million shares did not get traded by two Albanian winos hiding in a cave in Botswana). I realize SPCT is not a household name, but how many stocks of its size are dropping over 10 points?
To finish venting my spleen, I don't believe that SPCT will quickly return to 65. In fact, it probably will go up to 54-55 tomorrow and poop out. The market psychology behind its rise is broken. Now SPCT is just a stock that will meet estimates. Whoopee. In fact, there may be another attempt to induce a panic (CYMI has had three attempts - all successful with lasting effects). As a long term investor, all of this is more frustrating than harmful. Still, I don't need to lose any more hair than I already have lost. I would love to see SI contributors team up to push for better investor access to information and company involvement in stopping bogus rumors in their tracks.
Richard |
