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Time Warner Inc. Message Board

  • surendra_k_burman surendra_k_burman Feb 24, 1998 4:33 PM Flag


    Does anyone know why did it go down today??
    power outage????

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    • Selling.
      This is an overvalued stock which has reached a temporary peak.
      There were three straight days where the stock moved up largely on light volume. Today was the beginning of the sell process which will bring this stock at least down to touch its 30 week, and 10 week moving average which it has been flying off of too rapidly.

      The stock will pull back (and soon) to near 98. Wait to see this happen during early preannoucement season, and during the downgrades coming out from brokerages on this hyper-inflated Wall Street "Darling."

      Good luck

    • >Does anyone know why did it go down today??

      Because there were more sellers than buyers.

      But seriously, any reasons given to why a particular stock goes up or down are always just
      educated guesses (except in those clear times such as a stock tanking after filing chapter 11).

      Here is one possible contributor: Back a few months, AOL sold some convertible bonds at 4%. The
      bonds were to pay 4% (a very low rate for such junk bonds) and could convert after 90 days. Presumably,
      the buyers and sellers didn't think AOLs stock would go up as fast as it has and now
      those bonds can convert for a $15 or so premium. (That shows you that the AOL management did not
      expect their stock to rise to the level where it is today.) I suspect the bondholders converted
      and sold for a quick profit. Selling all those bonds may have contributed to the drop. Anyone
      have a URL for a story on the bonds? I forgot to bookmark it.

      Those extra shares (assuming they did the logical thing and convert) will make it all that
      much harder for AOL to reach meet its next earnings estimate. They'll have to cook the books "well done" next time.

      >power outage????
      That may have contributed, but certainly not determinative.

      The straddle suggestion is interesting, but now I'm starting to think that the two forces of
      1)Frenzied novice AOL buyers
      2)Overvalued stock price.
      may cancel each other out such that AOL just sits there. The stock may just sit at its current
      price and wait for earnings to "catch up". In such a case, the straddle will lose.

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