I just bought in last Friday. Hope I'm right - I've certainly been wrong before. Anyhow - regarding ELN vs MRK, a lot of it has to do with the spin put on the "news" by the various business media. CNBC this morning is treating the MRK story very gently indeed. "This in no way resembles the WCOM situation..." "MRK's 12B WAS according to GAAP, maybe GAAP needs to be revised..." "This doesn't affect MRK's INCOME..." etc.
Well, you get the idea. I'm not sure WHY they're reporting it like this, but I noticed a similar gentle treatment of Xerox' SIX-B mis-statement of revenue a week ago. Maybe, (with thanks to George Orwell), "all [companies] are equal, but some are more equal than others".
I totally agree with your post. MRK goes down $2 while ELN goes down to $2 while MRK's accounting news appears to be much worse than ELN's. That's exactly why ELN should begin to rally strongly from here.
I concur with your speculation. We will not know if it is more than speculation until after management explains themselves and the positions of Elan's cash, revenue and debt at this Tuesday's CC. If they do not do this concisely and without obfuscation management will the very credibility and leadership profile that is necessary to boost the fortunes of Elan's equity and debt ratings. It is because Merk's management is seen as fundemenatally strong that Merk's stock has remained a credit to that company's future, in spite of aggressive revenue accounting practices. Investors do not look at Merk as if it were a pyramid scheme, yet that appears to be the current view of Elan's hedging of royalties and the resulting short-term boost to revenue. If Elan did what it did for sound reasons they should be able to explain themselves and ground their motives in respectable principles. We shall see.