Manipulating a stock price

Cocking the Apple slingshot
[Via Brainstorm Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0]

Why would a stock like Apple fall 9% just before quarterly earnings are due?

MONDAY MORNING UPDATE: Throw another -3% on the barbie. One analyst called the opening bell selloff “panic profit taking.”

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I think it may be time once again to dust off Jason Schwarz’ classic blog post: Apple: Seven Reasons Shorts Love It.

Apple’s (AAPL) shares, in case you missed it, took a drubbing last week, falling $38.77 (6%) in four days — from Tuesday’s all-time intraday high of $644 to Friday’s close at $605.23. [They fell another 3% in early trading Monday.]

To be sure, there was a bit of negative news that could have triggered some selling. The Justice Department’s antitrust division sued Apple and five publishers last Tuesday for collusion in the e-book trade.

But that doesn’t really justify knocking $36 billion off Apple’s market cap [minus another $8.6 billion Monday morning]. Sales of e-books amount to a tiny fraction of a revenue rivulet (“Other music related products and services”) that including iTunes music sales represented just 4.4% of Apple’s total revenue last quarter.

[More]

Hedge funds love this. So do shorts. It always seems inevitable that the price drops before the earnings report and then it soars.

The Apple slingshot is how those financial guys make their bones.

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