Monday, April 7, 2008

Relationship Between CEO Statements, and SGP Stock Price

As I started to flesh out toward the end of this earlier post, I was very surprised that the CEO of Schering-Plough asserted, at least twice on public web-casts, that the decline in Schering-Plough's stock price was due -- at least in part -- to "press" or "media" over-reactions. That seemed (to me, to be) plainly false, even at the moment he made those statements.

On the other hand, when the independent market-forces, or expert-medical voices, had their say, the stock price reflected the severity of the ENHANCE-driven fall-off in Vytorin and Zetia profits. So, I thought it might be worthwhile to depict, in a graphical time-line fashion, the effect of these various statements, on the Adjusted NYSE Closing Prices of Schering-Plough stock. In each case, the price below reflects the first closing price after the relevant statement. Click the below to enlarge it. Note, in each case, that the rather steady stock price declines are stemmed by the CEO statement that falls in the middle of it. Note also that the decline resumes (or continues), and in fact, accelerates, once more independent voices are at the fore.

This is going to be an increasingly-troublesome set of facts for the CEO, and his Executive-Team, should Schering-Plough's stock price not shortly return to something like $27.50, after today. And, in my opinion, the chances of that happening are now -- at best -- remote.

It is rather hard to fathom what kind of advice holds that the CEO should have taken this course, here -- especially now, that his Executive-Team has come forward with a drastic, newly-sized-up $1 billion cost-cutting program -- largely to stem the very real tide of the ENHANCE fall-out. It was, and is, real. Blaming the press for the early stages of it may have caused many more investors additional losses. That much is unfortunate, in the extreme.

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