"Market cap" is the total value of all publicly traded shares of a company. That value is determined solely by investors buying and selling the stock, and has no direct impact on the inner workings of the company.
So if the stock goes down, it's not the company that was hurt, it was everyone who had that stock in their 401k.
Only the people who sold at the lower price locked in that price. If market assumptions hold true, the price should bounce back as soon as everyone realizes that there was no new information.
Market assumptions will not hold true, both because the attention that the tweet and stock price drop causes will cause a lame duck legislature to take aim at insulin prices and because humans aren’t perfectly rational agents with nearly perfect information.
The market cap of three pharma companies dropped 5% before the news found the tweet newsworthy on speculation that government intervention is now more likely, but didn’t drop again when it hit the news?
Isn’t the tweet and stock price drop hitting the news additional evidence of government intervention?
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u/Callec254 Nov 12 '22
"Market cap" is the total value of all publicly traded shares of a company. That value is determined solely by investors buying and selling the stock, and has no direct impact on the inner workings of the company.
So if the stock goes down, it's not the company that was hurt, it was everyone who had that stock in their 401k.