Share Dealing

info on shares please

Hi there. I am very new to stocks and shares and was hoping someone could answer a question please? I have noticed that the stock markets are in turmoil at the moment. What I would like to know the answer to is how come when a Company has suffered a pretty big loss, almost overnight their shares seem to pick up. I am curious as to how this can turn around so quickly? Many thanks.

Patti9 Mon 12/11/07 11:44

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BigMac
Mon 12/11/07
14:07

I'm no economist but reasons might include:

1. Shares had been sold ahead of the news of the loss (out of fear), which turns out to be not so bad as expected. People therefore see an opportunity to buy on the cheap, because the underlying asset (the company) is in better shape than was thought. More buyers = higher share price.

2. People have 'shorted' the shares - selling them at a high price (more sellers = lower share price) and then buying the shares at a lower price to deliver what they have already sold, which in turn puts upward pressure on the share price.

3. The bad news is accompanied by research from the company's brokers that gives a target share price way above the current level.

4. The company's directors are seen to be buying shares in the company - a vote of confidence from the management.

Hope this helps.

Patti9
Mon 12/11/07
14:37

Question Author

thank you. That was very helpful. I understand more than I did before.

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