Alper,
>While I don't think that the markets are very 'efficient', I can't >understand why we should see any price increase, on something that's >not news anymore. I mean, LGND has announced on quite a number of >occasions that the NDA filing will take place before the end of the >quarter.
If I promise you that if all goes well with my current endeavors, I will give you $1,000 on January 1, 2000, will you believe me? I suspect - hope actually! - that the answer would be a resounding no. You would simply not lend all that much credence to such a promise. But if things actually went well and I sent you the check, then you would lend more credence to my statement, n'est pas? And if it didn't bounce when it was presented to my bank you would probably be quite happy and concede that I meant what I said all along.
The situation is somewhat similar with LGND. They have made the promise and I am quite sure that this is part of the reason LGND's stock has been going up for some time. But once the NDA is actually submitted, their credibility will rise and the market has only one way to reward the company: price. Continuing with the analogy, the market would be quite happy if the NDA didn't bounce (if you will excuse the phrasing!). And when the market is happy with LGND, it will raise the price on it.
So in a sense, the market is efficient. It has included what it currenntly *knows* and *expects* from LGND and reflected it in the price. But the two have different weightings and when something moves from expectation to knowledge, the sum changes.
By the way, don't take this analogy to mean that a filing of the NDA will necessarily mean an increase in the price of LGND. Things could go the other way depending on how the market feels on the day of the announcement!
I guess I believe in the efficiency of the market if by that you mean that the market is able to take all that it knows or expects and come up with a price based on that. That does not mean you cannot make a good deal of money. You may possess knowledge beyond what the collective it has and this knowledge may allow you to come up with a different valuation. And if your expectations are connfirmed, the efficient market will eventually come to the same conclusions you did and reward you accordingly :-)
Sorry if this is a little on the silly side.
Cheers, Torben |
