Why so many rumors in the video game space about
acquisitions?
Because apparently they work. THQ Inc (THQI). was up 13% yesterday as a
result of a rumor that Viacom and others are interested in buying
them. But as one poster pointed out, why would THQ raise 100
million in a convertible offering one month prior to a proposed
buyout? It shouldn't make any sense. Yet, options
contract trading spiked up and so did the stock price.
Today, Electronic Arts (ERTS) is up 8% on a rumor that
Microsoft is interested in buying them. This would likely
result in EA's revenues being cut by well over half since Microsoft
would likely not be interested in publishing for Sony and Nintendo
consoles. Yet, options contract trading spiked up and so did
the stock price.
In a world of make-believe rumors, the trading effect is very
real. A website called theflyonthewall.com
seems to be the consistent source for ridiculous rumors like
this. Despite not making much sense, these large company
market caps are moving as a result of these stories. This
should tell us two things:
1) the stock market has once become a speculators ballpark,
awash with a blend of cash and thoughtlessness
2) theflyonthewall.com deserves some serious market
oversight. Where are they getting their information and are
they somehow profiting from distributing the information, beyond
their subscription revenue? Time and a close watchful eye
will tell.
In the least, it's time we start tracking what exactly they are
spreading and how often it turns out to be true or false.