Once news hits the wire, shares of a company can often exhibit wild swings one way or another depending on how that news is interpreted by the street. The reactions are typically knee jerk up or down, and balance out over time with sentiment. Think of a calm bucket of water after a pebble is thrown into it. As that pebble hits there's turmoil, but once the pebble settles in the waves lose energy and subside and all is back to normal.
This tumult to calm transition is typical of neutral news, or basically news which was expected by the street. This is what was seen in after hours trading when news that Mel Karmazin would be stepping down as Sirius XM (NASDAQ:SIRI) CEO on February 1st, 2013. Consider the following charts with after market activity following the news and then pre market the day after.
Hindsight is 20/20 and an important tool when gauging reactions of the masses. By looking at the chart above it can be seen that news of Mel Karmazin stepping down initially had a significant sell off effect right down into the low $2.70's, but that it quickly rebounded and leveled off. For those who succumbed to pre market jitters? The share price did not afford opportunity to reenter at those prices all day long. Anyone who sold out and wished to get back in was forced to buy at higher pricing. As I keep saying, it is very important to maintain perspective.
Not only was trading activity strong, but money flow into the stock was on the positive side as well, with far more trades going for the ask than the bid resulting in a 1.45 : 1 buy to sell ratio at close and a final share price closing green at $2.89.
This is certainly not a negative reaction, but I would not go so far as to say it is positive either. I'd say the news, with regards to investor sentiment, borders on a non event.
That's probably a good thing. Because of this investors would do well to immediately focus on the road ahead. Time to let Mel finish up at Sirius XM, say thank you, and welcome the new CEO when they are chosen. Looking back is great, and might make for some enjoyable conversation, but looking ahead is how you make money. That being said, the new CEO will be analyzed quite a bit, and investors will do well to make sure whoever is chosen leaves them with a comfortable feeling about their investment in Sirius XM.
It's quite obvious the street still has its eyes set ahead and focused down the track. The Q3 conference call is the next stop on the line on October 30th. Time for the train to leave this station and head onwards. Just make sure you're on it and didn't jump off in panic.
Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.