Destroying Stockholder Wealth
U.S. stocks gapped higher today on news of several big merger deals, including a three-way $40 billion merger in the mining sector by Phelps Dodge and Johnson & Johnson’s acquisition of Pfizer’s consumer-products business. Both Phelps Dodge and Johnson & Johnson fell on this news.
Will merger deals save the market or sink the market?
Mergers are a sign that it is very late in the financial cycle when corporations have more money than intelligence. After all, most mergers don’t really work and end up actually Destroying Stockholder Wealth.
Nevertheless, our friends in the media always tell us that mergers are good news. But the market tells us mergers are not good news.
Who do you Trust, the market, or the media?