why is 3m comapny stock declining
... begin to worry about the quality of control management will have over the new acquisition. In retrospect, studies have shown that when another company acquires a target company the stock price of the company that does the acquiring tends to decline while the target company’s stock tends to increase. The latter is partly due to the fact that the acquiring company pays a premium for the target. Investors could also see the increase in the diversification a potential accounting scandal or problem. The recent accounting scandals have brought major concerns to the marketplace and have caused investors to be more cautious with their investments. A company such as 3M draws major accounting concerns to investors because of the difficulty in accounting practices within their different divisions where there is an even greater degree of diversification. As the company attempts to further diversify by developing new concepts and directions simultaneously, investors are keeping a close eye on the focus of the company. As a direct result their thoughts and theories are reflected through the price of the stock. Another possible cause of the decline in stock price of 3M is the increase in the competition of rival products within each of their corresponding industries. Competition continues to increase across all market segments and as a result 3M is losing valuable market share. Some analysts believe that this is such a concern that they are recommending investors to switch their positions from 3M Co. to shares in rival’s General Electric and Tyco, who are continually increasing their market share. On top of 3M losing market share to their main competitors, there has been a slowing growth in sales in the developed world. With this said 3M exposes itself to new risks by increasingly relying on the developing nations, where markets are more unstable than the mature markets, for future sales growth. In turn investors understand these risks involved in future growth and adjust their portfolios accordingly. On top of this the company has failed to meet Wall-Street expectations the last few quarters. Although they have been increasing their sales, Investors had been anticipating higher growth. This could lead to post earnings price drift where after the disappointing earnings are reported there tends to be a downward drift in the price of the sto...