Failure in Stocks – Identifying the Key Factors Behind Stock Failure

Failure in stocks means that a company’s stock price has declined compared to its previous period value. This decline in stock price could be short term in where company regains its high stock price value instantly or it could be a permanent decline where company’s decreased stock price value will extend to long periods. 

The basic supply and demand mechanism is operating behind the rise and fall of stock prices. When there is some positive news or anticipation about a company then more and more investors will wish to hold its stocks. This will drive up the demand for company’s stock and there will be a greater value attached to its stock price. On the other hand when there is some bad news or actions circulating the company then more investors will wish to sell off its stock. This in turn will decrease the demand for company’s stocks. Hence; there will be a downward push in the stock price of this company.

There are number of factors that are responsible for the failure of stocks and some of the most prominent ones are; changes in laws and regulations, changes in the management structure of  company, failure in mergers and acquisitions, failure of products launched by company, good performance by competitors, and expectations and news surrounding the company. 

The most recent and notable failures in stocks were caused by one of the above mentioned factors. Recent and significant example regarding failure in stocks is that of EBX Group. It could not deliver on its promised production of oil and as a result its stocks price went through a drastic decline of over ninety five percent within one year. J.C. Penney can be used as another example for major recent failure in stocks. It decided to bring in changes to the company’s structure without doing thorough evaluations and as a result it stocks value fell down to $14 from $42. Sears Holdings is another major company that has experienced a failure in stocks recently. It has made a wrong investment decision by preferring technology department over its department stores chain and marketing actions. As a result there was a sharp decline in stocks price of the company and it had to bear net loss worth $800 million within three years.