Efficient Market Hypothesis – Counter Arguments – Series

This headline on Marketwatch.com just now reminded me of the theory you learn in Finance; Efficient Market Hypothesis.

Additional pent up supply not on the radar of all investors suddenly coming to the market, or just the possibility of it coming to market can lead to big moves; see below

efficient-market-hypothesis-contra-counter-arguments

 

“Our large early investors, as well as of some of our key insiders … don’t intend to sell immediately upon lockup expiration,” Chief Financial Officer Mike Gupta had told analysts during Twitter’s earnings call last month.

But, he added that “a meaningful portion of the supply … could in theory come to market after lockup expiration.”

The company had earlier announced that Twitter Inc. co-founders Jack Dorsey and Evan Williams, as well as Chief Executive Richard Costolo, have no plans to sell any of their shares.

Twitter also said Benchmark venture capital funds, which are affiliated with a Twitter director, also told the company that they have “no present intention to sell or distribute stock to their limited partners before or immediately after the expiration of our lockup.”

The wave of unlocked shares hit at a time when Twitter, despite recording surging revenue, has struggled with worries about slower user growth.

”It’s typical and many times almost a self fulfilling prophecy,” Wedbush analyst Shyam Patil told MarketWatch, as he reacted to the stock drop.

source: MarketWatch.com

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