Analysis of Stock Returns for both Pfizer and AstraZeneca during the Bid Process - Essay Example

Factors such as “investment strategies,” “ownership forms,” “capital structures,” and “dividend policies” that are likely to change with an acquisition are also likely to influence stock prices (Moyer, McGuigan, & Kretlow 2008, p. 12). In addition, expressed opinions by investors can either improve or reduce share price at a time (Khan & Zuberi 1999, p. 45) and all these could have influenced prices and return of the two companies’ stock.

One of the key dates in the takeover period is November 25, 2013, when Pfizer informed AstraZeneca of the intended takeover. Even though it was private correspondence, it could have spread to stakeholders and a perceived lost value among Pfizer’s stakeholders could have triggered the observed negative change in stock price. Price for AstraZeneca however increased afterward to indicate perceived benefits by the company’s stockholders. These suggest that Pfizer offered better economic prospects than AstraZeneca did at the time, and its internal environment could be more promising than that of AstraZeneca. On May 1, 2014, Pfizer made public its takeover interest and suffered a subsequent decline in price, which began two days earlier, and perceived loss of advantage by existing stockholders as well as possible negative investor opinions could have caused the decline. At the same time, the stock price for AstraZeneca declined and this could be a response to Pfizer’s price trends that made it less attractive.

The fall in stock price for Pfizer continued until 7 May, a time at which the British Prime Minister expressed concerns over the takeover, and then stabilized until mid-May. The price for AstraZeneca stock however remained constant over this period. Pfizer’s persistence on the takeover, against its shareholder’s confidence could explain the fall and the political opposition appear to have developed the investors’ confidence towards stability. At the same time, a possible opinion that the takeover would not be possible could have reduced expectations from AstraZeneca’s stock price, leading to its stability. Stock prices for both companies then remained stable at a time when stockholders for both companies appear to have given up on the takeover bid. With the expected final rejection of the bit, the price for AstraZeneca’s stock fell before stabilizing while that of Pfizer began to improve gradually. It is also important to note that with the final rejection, prices for both companies’ stocks stabilized towards their values before the bid intensified in early May (Farrell 2014, p. 1; Market Watch 2014, p. 1).

Investors’ expectations, organizations’ internal factors into returns, and possible opinions on the effects of the takeover were, therefore, possible factors to the changes in stock prices for both companies during the takeover bid period.


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