Understanding Stock Market Rumors: A Case of iRobot (IRBT) and Amazon

Understanding Stock Market Rumors: A Case of iRobot (IRBT) and Amazon

Nov 27, 2023

Hello everyone, I am Barrie Einarson from Trade Ideas, and welcome to today’s edition of “What Makes This Stock Great.”

However, today’s discussion will be a little different. It’s not necessarily about what is making a stock great but more about an interesting case that unfolded recently with iRobot (IRBT). Subscribe: https://go.trade-ideas.com/SHQ
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The Rumor Mill and Its Impact

If you happened to join us in the trading room last Friday, you might remember the buzz around iRobot.

The Friday daily candle for IRBT showed a significant spike. The cause? Rumors swirling that the European Union was going to approve Amazon’s acquisition of iRobot. This news had quite the impact, noticeably driving the prices upward.

This rumor had been circulating for a while and seemed pretty reliable, spurring some serious movements on the trading floor. It was whispered that the buyout price would be at around $51.

The Inherent Uncertainty of the Stock Market

Here’s the cryptic beauty of the stock market: nothing is a hundred percent certain. The people at iRobot didn’t confirm this news. Neither did Amazon or the European Union. Yet, the rumor felt substantial enough to influence the market.

Fast forward to 01:00 P.M., the next trading day. Suddenly, the European Union expressed their reservations regarding the deal. They doubted the acquisition’s potential, raising concerns about stifling competition. And right away, we saw the prices retreat, suggesting hesitation from the market’s end.

Imagine having invested a considerable sum, banking on the stocks to soar to the supposed buyout price of $51, only to see it dive all the way down to $31. That’s a price drop of $10 – not a small amount by any means.

That is the key message I want to share today: don’t believe everything you read until it is finalized, especially in the stock market.

I couldn’t stress this enough but here goes: until a deal or any significant event is officially confirmed, it’s best to keep your eyes wide open and continue to question everything.

Final Thoughts

That’s all for today, folks. I hope you all had an amazing Thanksgiving holiday. I’ll be back in the trading room tomorrow at 09:00 A.M., and no, it’s not 08:00, but 09:00. Looking forward to having you all.

Enjoy your evening and see you tomorrow.

Trade smart and keep questioning!