Henry Blodget shouldn’t be so quick to dismiss theory of Apple stock manipulation

Thu, Jan 17, 2013


Earlier this week, a somewhat suspect story leaked claiming that Apple was reducing its iPhone 5 display orders by a factor of 50%. Since then, some folks are shouting that Apple’s best days are behind it while others are suspecting that there may be a bit of stock manipulation at work ahead of Apple’s earnings release for the 2012 holiday quarter.

One person who isn’t buying such theories is Business Insider’s Henry Blodget.

I’m sorry to disappoint diehard Apple fans, but it is the height of reality distortion to believe that a 30% fall in the stock of the world’s most valuable company is just “stock manipulation.”

Doesn’t stock manipulation only manifest itself with a significant bump or decline in share price? In other words, the very objective of stock manipulation is to cause huge swings in a company’s valuation. For a company as controversial as Apple, 30% is certainly do-able with the right rumor.

No one has the power to “manipulate” Apple’s stock to that extent. Apple is one of the most liquid stocks in the world. The folks who trade millions of shares of Apple stock every day are a highly diverse group of investors. Bad information can temporarily move stocks, yes, but the market is very good at sorting out whether new information is bad information or weak information and discounting it accordingly. So if, say, last week’s report that Apple had cut its¬†iPhone¬†orders in half was, in fact, inaccurate, the market has long since factored that possibility into the stock price.

Complete BS. Jim Cramer not too long ago explained just how easy it is to manipulate the share price of a company like Apple. Furthermore, the market is HORRIBLE at sorting out which information is bad and which is good. The most recent story regarding Apple scaling back its iPhone 5 display orders raised more questions than answers and was relayed by the Wall Street Journal, which subsequently made a number of amendments to its initial report. In other words, the market at large is highly susceptible to market misinformation, and truth be told, the notion that the story may be off-base has not yet been factored into Apple’s share price because most folks are accepting it as gospel without apply any requisite context.

Blodget goes on to make, surprisingly, a number of cogent points regarding Apple’s future prospects and its current share price.

That notwithstanding, the timing of this week’s iPhone 5 display rumor is highly curious, even more so given how it was scant on specific details.

Lastly, it’s ironic that Blodget, who was not too long ago charged with civil securities fraud and who is now banned from the securities industry altogether, is so certain, of all people, that the recent downturn in Apple’s share price has nothing to do with stock manipulation.

Related: The motivation to keep Apple shares down until January 19

via Business Insider



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