You’d think that the stock price of a company indicates its success, but that’s not always the case.
Theoretically if a publicly-traded 3D printer company’s revenues or potential rises, then the stock price should follow. That’s often the case. Stock watchers may note shifts in “investor sentiment” through analytics and conclude the stock should be bought – or sold, depending on the analysis.
Yes, the health and potential of a company does indeed play into the level of a company’s stock price. But there’s another factor that can sometimes be hidden: acquisitions.
The price of a stock is based on demand. If there are more parties willing to buy a stock, then the price will tend to rise as the parties attempt to outbid each other. This happens every day with stock trading, but an acquisition scenario can change things dramatically.
If a third party announces (or hints) they intend on acquiring a portion or all of a 3D printer company’s stocks, then there is literally a bulk pending demand for that particular stock. It’s like a massive amount of individual buyers said they’re going to buy the stock next Tuesday.
What do you think would happen to the price of the stock? That’s right, it rises, sometimes quite dramatically. Those that held the stock or bought it before the announcement can be huge winners.
The thing is, this scenario can occur without an official announcement from a third party. Mere rumors of an acquisition are often enough to put a stock at levels it would not otherwise hold.
And guess what? This effect occurs often regardless of the current health and potential of the company! In other words, if someone is apparently willing to buy large chunks of a company, the price rises regardless of whether the company is in trouble. In fact, troubled companies are often the ones that are acquired and their stock price may rise temporarily during this scenario.
I guess what I’m trying to say is that you shouldn’t put much stock in the price of stocks if you’re trying to gauge the health of a 3D printer manufacturer. When the company is publicly traded, things happen to the price that are not necessarily a reflection on their actual activities.
