Uniteds stock is set to fall 2% and wipe $500 million off the airlines market cap

[BigBearJohn]

Shares in United Continental Holdings Inc. were falling 2.4% in premarket trading on Tuesday, as the airline continued to draw flak for having a passenger forcibly dragged off a plane Sunday.

If the carrier’s stock drops by that much at the opening bell, United UAL, -2.10% will have about $500 million wiped off its market capitalization. The company’s market cap is currently $22.5 billion, according to FactSet data.

Earlier Tuesday, United shares had been down by as much as 6% premarket, and a fall of that magnitude would erase $1.4 billion from the company’s market cap.

SOURCE: http://www.marketwatch.com/story/uniteds-stock-is-set-to-fall-5-and-wipe-1-billion-off-the-airlines-market-cap-2017-04-11

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[CincyDem]

1. Should have offered more cash to empty those 4 seats, eh ?

This will show up in future dictionaries as the definition of "penny wise and pound foolish".

[Pachamama]

3. +1000

Goodbye Oscar Munoz..

He probably should have made a statement about how he is going to identify what they did wrong and make sure it never happens again....instead of his statement that his employees did everything correct....hint to Oscar: No, they didn't. And if they were following an incorrect policy, that's your responsibility.

[KingCharlemagne]

9. Or "Pyrrhic Victory" - nt

[caroldansen]

2. They should do something about all four officials who

dragged him off the plane and hurt him.

[Baconator]

5. Were they United employees?

... or local airport police?

[ecstatic]

4. Their fate will be determined by their ticket pricing

Despite everything that occurred, SMH. They'll have to price lower than comparable airlines for the foreseeable future.

Then again, their CEO still doesn't seem to understand the outrage, so I wouldn't be surprised if they kept prices the same until the company folded.

[Baconator]

6. They'll wait it out...

... and take some hits on the way but in the end they know that people need to fly and will eventually shut up about it.

Same model that has made airline travel such a shit show in recent decades.

[nycbos]

13. Yup absolutely

[HAB911]

7. Hit 'em in the wallet

it's the only thing they understand

[LonePirate]

8. Sadly, a well-deserved stock price dive is about the only thing that will prod action from United.

Stock prices and market value are all that matter to corporate America nowadays. If the stock tanks sufficiently, they will finally take action here.

[BigBearJohn]

10. -or- How a CEO loses his job in one day

[littlemissmartypants]

11. Six percent. Ouch. eom

[Justice]

12. Could have purchased a plane to fly those employees - or 4 planes, one for each

[eniwetok]

14. market cap is a bogus concept

If a company has 10 shares and one sold for $10 then the market cap for that company would be $100. If the next day one sold for $5... the market cap would drop to $50?

[CincyDem]

15. yes - that's exactly what would happen.

And, as a result of that $5/share sale on the next day...the value of every United employee's 401k would drop 50%. Is it a "real" drop...only to the degree that you believe little pieces of paper can have any value at all. What it really means is that one of those 10 shareholders wanted to dump a share and they had to drop the price to 5 bucks to find someone willing to buy it. They wanted out bad enough to take a 50% haircut...and nobody else wanted it enough to pay more than 50%.

Believe me, if the market cap of united dropped 50% today, their CEO would crawl up the aisle himself on his hands on video to keep his job. Even then it probably wouldn't work.

[eniwetok]

16. portfolio value is not real value

Market cap is based on a bogus concept that "the market" has truly "valued" a corporation's worth by applying today's stock price to ALL shares even if an infinitesimal percentage of the company's shares were even traded that day.

Problem is as soon soon as 2-3-4% of shareholders try to cash in... the value goes down. 10%... the price plummets.

[CincyDem]

19. Sure - ok.

Sounds lie a great economic argument. From a financial perspective, I think we would agree that that only real value of a corporation is book - usually far far far less than market value. Anything above book is trading value and you're right, when 10% of owners decide there's enough wrong with this stock to want out (at any price), that leads to herd mentality.

That said - suggesting that market cap is a bogus concept misses the point. Try using stock as loan collateral and convincing the bank that the real value of the stock is different from the market value. For the bulk of the population, market value is real value. You can ride out the swings and not realize the gain/loss but that doesn't mean that the value isn't changing with the market.

[eniwetok]

21. sure market cap is misused...

Such as in buyouts or mergers. The only real value of a corporation are its assets and there's usually a marginal connection between that and the value of stocks because the latter is relative. It can be related to revenue/dividends but largely it's what someone thinks it will be worth to a third party in the future.

[Major Nikon]

22. You could expand that same argument to pretty much anything of value

Including the greenbacks in your wallet.

[sarcasmo]

17. The CEO needs to go.

[lpbk2713]

18. That was one expensive blunder.

...

[LongTomH]

20. Couldn't happen to a nicer bunch of guys!

The value of their shares isn't the only thing they need to worry about; how many people will decide to fly United now?