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Google Businesses The Almighty Buck

Below-Expected Earnings For Google Posted Early, Trading Halted 275

Posted by timothy
from the no-peeking-this-time dept.
An anonymous reader writes with this snippet from the BBC: "Trading in Google shares has been suspended after the internet giant released its third-quarter results early by mistake. Google blames financial printing firm RR Donnelley for filing an early draft of the results, which had been expected after the closing bell. Shares in Google were down 9% when trading in the stock was suspended. Shares had fallen as much as 10.5% at one stage. In a statement, Google said: 'Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorisation... We have ceased trading on Nasdaq while we work to finalise the document. Once it's finalised we will release our earnings, resume trading on Nasdaq and hold our earnings call as normal at 1:30 PST.'"
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Below-Expected Earnings For Google Posted Early, Trading Halted

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  • If their earnings report has already been leaked and the results arent good doesnt that mean shares will still fall in price? If the new report has drastically different results wouldnt you suspect Google is simply flufffing up the results to save face?
    • by AuMatar (183847) on Thursday October 18, 2012 @03:54PM (#41697629)

      The big deal is announcing during the day. You're supposed to announce when its closed, so people can react at the same time the next morning. That's a big fuck up that could bring the SEC down with fines.

      • by sjames (1099)

        So, what they're saying is the stock market should use a large quantum of time rather than the HF bull? Sounds good, but they need to generalize the policy.

      • by tukang (1209392)

        Have you ever heard of after-hours trading? Stock prices react immediately after earnings release even when earnings are released at the closing bell. The next morning the market opens lower, so releasing after the close doesn't make any difference w/r allowing people to react at the same time.

        The big deal isn't that it was announced during the day, the big deal is that it was announced before it was scheduled, so anyone who was planning to get out before the earnings release wasn't able to do so.

        • by AuMatar (183847)

          THe market opening lower the next morning has nothing to do with after hour trading. The market opens lower the next morning if the bid and ask prices are lower. What it sold for overnight has no effect on that, unless people looked at those prices and adjusted theirs accordingly. But the "open" is no more than the first purchase made at whatever people had previously ordered.

    • by Antipater (2053064) on Thursday October 18, 2012 @03:57PM (#41697659)
      Traders are panicky sheep. Or lemmings. Or whatever. When these numbers get released during the day, everybody runs to SELLSELLSELLOHGODSELLIT. If they wait to release the numbers after the closing bell, the markets have all night for people to calm down and realize that the report isn't all that bad after all, and there's less downward pressure.
      • by jader3rd (2222716)
        Is traders always sell if a report is released during the day, wouldn't someone always make money by buying on that day, because the market will adjust reasonably over the next few days?
        • by Ghostworks (991012) on Thursday October 18, 2012 @04:35PM (#41698145)

          Everyone expects reports after the bell. That way, there's time to actually read and reflect, and everyone starts on a similar footing when trading resumes in the morning. Just as importantly, everyone knows and expects that they'll start on a similar footing in the morning.

          If it were released during the trading day, there'd be pressure to analyse the document (and I use the phrase loosely here) as quickly as possible, so you can sell while it's still high or buy when it's still low, before most people have had a chance to process the new information. Most of the time, this means jumping on a single factor and reacting strongly.

          Of course, then other people wouldn't actually need read the document. They would just see the line trending, say, up and then figure that someone who can analyse better and more quickly than they has seen a value increase and is now buying. So they would buy. And why not? As long as they're on the rising edge, and can recognize a peak/plateau, they can sell at the peak and still make money. So this compressed window leads to panicked decisions based on incomplete information which is multiplied across the market. Very disruptive.

          Now, imagine if the report were not only released during trading, but _unexpectedly_ so. Not only would you have information, you would have information that the majority of actors don't have. You would have an advantage over them, one that will evaporate in a matter of minutes or hours. Once the trading halted for the day, the advantage would be lost. So they would move even more quickly and panicked than if they had been expecting the report during trading (which, of course, no one was).

          The phenomenon you describe -- trying to profit off of the correction when the initial trend is proven to be based on incorrect assumptions -- would then drag the trading artificially in the opposite direction. It's like kicking and oscillator. And, of course, there's no reason that a smaller group of investors couldn't capitalize on the over-correction, and another group on the re-correction, and so on. Maybe the price "rings" for a long, long time before it settles to a more representative value. Maybe it gets so low or high that non-linear effects ("buy at ..."/"sell at ..." directives) come into play and either dampen or excite the oscillation further. Maybe the stock just bottoms out -- that is to say, the investors buying or selling lose enough money at once that they can't make call, even though the stock they hold may have value.

          It's hard to say. But considering that it's all an artifact of traders trying to capitalize on the stupidity of other traders, and not at all a matter of the real price of the stock, it sounds like the kind of thing you want to discourage as much as possible.

          On a related note: based on the chaos caused by automated trading routines of late, I think we can expect more limits and delays on trading to be mandated in the future.

        • by ais523 (1172701)

          No, the problem is that if other people are selling, your optimal way to make money is to sell first but slightly before they do.

          The real problem with the markets is that the way you make money on them is to do the same as everyone else, just faster

      • by dkleinsc (563838) on Thursday October 18, 2012 @04:15PM (#41697933) Homepage

        That's why a useful strategy with fundamentally sound stocks is to play the counter-cyclical game: When the market is going "SELLSELLSELLOHGODSELLIT", that's your signal to start looking for a price that you will buy at. When the market is saying "This is the best company to ever exist!", start selling.

        Of course, the risk in this strategy is that the reason the market is going SELLSELLSELL is because the stock is no longer sound. But that's unlikely if it's a company that actually makes something.

        • by schnell (163007)

          When the market is saying "This is the best company to ever exist!", start selling.

          There's a risk to that, too. I did exactly what you describe and sold most of my Apple shares back when I started thinking that investors were overhyping the stock. That was at around $185/share. It seems I missed out on just a little bit of money that way [yahoo.com].

          The bottom line of the stock market is that professional investors will throw money at anything that is growing its revenues/profit, and run away from anything that's shrinking - regardless of the health of their balance sheet. If you can pick who's going

          • by dkleinsc (563838)

            A useful strategy to prevent that is to sell enough to make back the original investment, and let the rest just go for the ride. Because you're in pure profit territory, you're less likely to sell into a panic like a lot of people just did.

        • by ceoyoyo (59147)

          "But that's unlikely if it's a company that actually makes something."

          Yes, but we're talking about Google.

      • Traders are panicky sheep.

        Was that augmented by panicky algorithms doing an impression of the robot scared by Chewbacca? Rawr! Squeeeeeee..... zip.

        • by sjames (1099)

          They got confused, they meant to emulate a robot, but ended up with Dr. Smith.

      • by Ghostworks (991012) on Thursday October 18, 2012 @04:50PM (#41698307)

        The main thing you have to remember about aggressive traders is that they're actually both smarter and dumber than you'd expect. That is, they're smart enough to recognize that most of their money is not made by spotting winners or losers early enough to get on the winning team. No, most of their money is stolen in fits by outracing other investors when things suddenly change. If we're lucky, they usually have a counterpart somewhere who is responsible for shepherding a reserve of cash, slowly built up by investing in solid companies as they build, so that the life and death of the aggressive portfolio is not also the life and death of the company.

        The aggressive traders know a lot of their job comes down to timing, that the value they gain and trade is temporary, and that eventually the whole thing will melt down around them. Eventually, they will be the slow guy getting beat by faster guys. The large scale and small scale objectives are similar: get in on the rising edge, get yours, and get out before the whole thing goes to hell. Collapse is not an "if", it's a "when". The first thing they look for is always "when do I pull out?"

      • Traders are panicky sheep.

        I would put it differently. People are panicky sheep. Traders are gamblers. Nothing more. Traders are gambling on how other people are going to respond.

        In the absence of dividends, what's a stock?

        Of course this is somewhat less than true now with all of the algorithmic trading and high-frequency trading that goes on. Nonetheless, at its core, the market is about emotion. Traders make--and lose--money based on emotions, not facts and fundamentals.

    • by alen (225700)

      how are they going to report drastically different earnings a few hours later? the quarter ended over a month ago, it's not like they can just push some business into the release to meet the numbers.

      • Re: (Score:2, Informative)

        by Anonymous Coward

        how are they going to report drastically different earnings a few hours later? the quarter ended over a month ago, it's not like they can just push some business into the release to meet the numbers.

        It's not that the numbers will change. It's that you don't just surprise people with numbers, period. Release it after the markets are closed so everyone effectively gets full information at the same point in time. As for "finishing" the document, it may just be a matter of editing, etc. I highly doubt there would be material changes made this late.

  • Why halt trading? (Score:3, Insightful)

    by Anonymous Coward on Thursday October 18, 2012 @03:58PM (#41697685)

    This seems really silly to halt trading. If people are dumping their stock due to speculation or accidental reports, let them do it! This just means that others can buy the stock while it's down and should the actual report come in that and everything be ok, well those early speculators just lost out.

    It just seems like by having trades be halted if things get too crazy or even backing out trades if they were due to HFT bugs, you're removing all the risk and just enabling dumber and bolder investment strategies.

    • Re:Why halt trading? (Score:5, Interesting)

      by EmagGeek (574360) <gterich@aol.LISPcom minus language> on Thursday October 18, 2012 @04:08PM (#41697817) Journal

      They have to halt trading to prevent automated trading programs from selling it down to zero.

      Once there's a fast enough and large enough movement, you start getting more selling from automatic stop-loss orders, automatic short selling, and all kinds of nasty things.

      The idea of a trading halt is to prevent computer programs from destroying the economy in milliseconds. Garbage in, garbage out, you know.

      • by Chirs (87576) on Thursday October 18, 2012 @04:11PM (#41697863)

        perhaps they shouldn't be allowed to trade.

        • by tool462 (677306)

          Can't do that. Corporations are people too. Preventing them from trading would be violating their rights to freedom of speech, assembly, etc. /me removes tongue from cheek.

      • This seems like an instance of human traders being smarter than the bots.

        I think it's unfair to long-term investors, and humans in general, to halt trading just because the automated traders are overreacting. It looks just like another instance of the market being managed to give Wall Street institutions and HF traders an advantage over retail traders. Can somebody explain to me why this is legal?

        Wall Street, read this: if you continue to stack the deck against retail traders, mom-and-pop investors are g

        • by Americano (920576)

          The irony is that it's NOT the algo traders that are typically dumping the stock "at any price". It's entirely possible for bad algorithms to exist that will continue selling any stock without any lower bound, but there's also a lot of algorithms that will note the movement of the stock price and start buying up the stock at those panic-depressed prices. You'd be hard-pressed to find a lot of humans willing to do the same - this means that the panicking humans are going to be taken advantage of by the big

      • I don't think it would actually destroy the economy. The automated investors... well that's a different story. In the end, all this means that someone gets lucky and buy Google at bargain basement prices (if the circuit breaker doesn't kick in) and the unlucky investors sold their shares for much less than they were potentially worth.
      • Re:Why halt trading? (Score:5, Informative)

        by slew (2918) on Thursday October 18, 2012 @04:54PM (#41698365)

        In this case Google requested that the Nasdaq halt trading for a "news-pending" reason. The general theory behind allowing a company to halt it's own stock is so to give time for investors to evalute potentially material financial information (or in this case accidential financial information).

        There is also a regulatory pause (called a circuit-breaker) if a stock moves more than 10% in five minute window. The primary reason for this type of halt trading is that there is a large imbalance between buyers and sellers (much larger than the market makers can absorb). In these types of situations, it is essentially impossible to fairly price (and thus report) a stock trade which can cause the instability in automated trading programs that you are referring to.

        I believe that the erroneous report was released @12:30EDT and by the time GOOG was halted @12:50, it was only down about 9%, and it resumed trading @3:20 and finished only about 8% down. I don't think that was enough to trigger an automatic circuit-breaker. The stock was halted because GOOG requested it (when it realized what had happened).

      • by sjames (1099)

        In other words, gotta protect the big HF traders from themselves, we can't have them losing money to the peons, now can we?

      • by biodata (1981610)
        Why is this bad though? If a company has actual assets, then trading its shares seems unlikely to affect its real value long-term. If a company is basically worthless then let the gamblers gamble with the brakes off. Perhaps it would encourage people to be in shares for the long-term like they are meant to be.
      • Sounds like the system is broke then.
  • by Anonymous Coward
    in for 100 shares at $694.38. It'll be over $700 by COB tomorrow.
  • News sources (Score:4, Interesting)

    by Dan East (318230) on Thursday October 18, 2012 @04:01PM (#41697723) Homepage Journal

    A pet peeve of mine (and one of my biggest gripes with Google News) is promoting news sources that are nationally or geographically far removed from the event in question. In this case, I noticed the British spelling of "finalise", which directed my attention to the fact that the linked article is from the BBC. So then I assumed this was in some way related to the London Stock Exchange, or it was the UK division of Google that prematurely released the figures. However that is not the case as this was indeed suspended on NASDAQ and involved the parent Google company.

    • by tuppe666 (904118)

      A pet peeve of mine (and one of my biggest gripes with Google News) is promoting news sources that are nationally or geographically far removed from the event in question. In this case, I noticed the British spelling of "finalise", which directed my attention to the fact that the linked article is from the BBC. So then I assumed this was in some way related to the London Stock Exchange, or it was the UK division of Google that prematurely released the figures. However that is not the case as this was indeed suspended on NASDAQ and involved the parent Google company.

      I'm not sure why we are subjected to a journalists biased view, rather than post the financial statements. http://investor.google.com/financial/tables.html [google.com].

    • Re:News sources (Score:4, Informative)

      by Bill_the_Engineer (772575) on Thursday October 18, 2012 @04:28PM (#41698053)
      Look on the bright side, it has a better chance of being more accurate than Fox news.
    • Re:News sources (Score:5, Informative)

      by Anonymous Coward on Thursday October 18, 2012 @04:38PM (#41698181)

      I'm the American who submitted it. Born and raised, lightly educated by comparison.
      I realize how flawed the BBC is as a British Commonwealth Corporation, in your eyes.
      I found the summary contained the most timely and pertinent information in a concise blob...
      of any major media reporting body that was running the story at the time.

      I could give two shits about 'finalise' v 'finalize', potato/potahto or other musket v. rifle instances.

      It took roughly 15 or 20 for Timothy to massage the href and post it up.

      The trading resumed 8 minutes ago.

      Time was of the fucking essence, in a sense.

      • by Maow (620678)

        I could give two shits about 'finalise' v 'finalize', potato/potahto or other musket v. rifle instances.

        I agree 100%, except for "I could give two shits". It makes no sense! It ought to be "I couldn't give..."

        Okay, done with my daily pissing-into-the-wind ritual.

        Cheers

    • Ah, I see the problem.. right there:

      I assumed

      Now why would you do that?

  • by lobiusmoop (305328) on Thursday October 18, 2012 @04:02PM (#41697743) Homepage

    Just in time for the 25th anniversary of Black Monday [wikipedia.org] crash, where the Dow lost 22% in one day.

    • by alphatel (1450715) *
      What if advertising costs and revenue drops are the result of Panda/Penguin and other updates intended to weed out spammers and drive better CPC results?
    • by WillAffleckUW (858324) on Thursday October 18, 2012 @05:40PM (#41698937) Homepage Journal

      Strange story, that. I've been investing since I was a teen, and did paper trading in grade school from stock tables.

      On Black Monday, after having just written an Economics paper for Capilano University on ethical investing, for which I'd researched true and tax book value for corporations, I realized that Apple was selling at such a low rate you couldn't lose if you bought it.

      I phoned my grandmother and told her not to panic, and to put $10,000 in Apple stock. She did. Later she gifted part of it to me. I later sold parts of that and bought and sold Microsoft stock from the proceeds, which became the 20 percent downpayment on my first house.

      Best stock day ever.

      This led me to a later decision to buy 600 shares of Ford on what turned out to be the absolute bottom of the market. Made a killing on that.

      From risk, comes opportunity.

      • by greg1104 (461138)

        There is nothing to prevent trading on a stock from becoming so irrational that it goes outside of the fundamentals floor, crashing below the book value of the company, particularly in a panic. Stocks whose price drops enough to start tripping stop loss orders can easily accelerate right below that for some amount of time, with fun stuff like margin calls joining the party too. Value investing based on fundamentals can work very well. But the idea that it must bound the movement of a stock's price, which

  • by kiriath (2670145)

    Some analyst somewhere just got canned. Hard core canned to like "You don't even get to keep the stuff on your desk GTFO"... like thrown from a window canned.

    • Re: (Score:2, Funny)

      by Anonymous Coward

      How droll. He was shot.

      Out of a cannon.

      Into the sun.

  • by peter303 (12292) on Thursday October 18, 2012 @05:12PM (#41698597)
    Mobile phones and tablets are sucking the profit out of them. They dont have a vertical supply chain of factories and stores like Apple.
    • by tftp (111690)

      Mobile phones and tablets are sucking the profit out of them. They dont have a vertical supply chain of factories and stores like Apple.

      Look at it from another angle. Google is servicing the constantly growing mass of mobile devices, and at the same time it does not need to take risk with design, assembly, sales and service of those devices! Profit comes not from selling a phone once in two years but from charging an advertiser $0.001 each time one of those mindless phone users looks at an ad that Google

  • Buy low, sell high, eh? Isn't that capitalism 101? Convenient we can blame a scapegoat!!

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