[akira2501]

> The shareholders perform the socially useful service of measuring the badness

That's a dangerous idea as it presumes that shareholders are investing not for profit but to improve "goodness" in the world. This is obviously not true.

The shareholders are providing the economically useful service of measuring _risk_ to those future profits. These two factors may be linked through an abstraction but they are most definitely not equivalent.

> they can penalize companies that do bad things

Without journalists to expose the bad things in the first place the investors can do no such thing. There is no mechanism in place to discover these facts and there is no effort to build one independent of journalism.

[tylervigen]

The author (Matt Levine) is always a bit tongue in cheek about securities fraud and the “socially useful” role shareholders play in pricing securities. He writes about these kind of incidents in a weekly basis, so his typical audience knows to read it that way.

[theGnuMe]

He likes to point out that basically everything and anything a company may do is securities fraud. It’s almost parody at this point, which I think is his point. So it’s basically impossible to exist without committing said fraud by definition. That seems to be a problem — likely a structural one as well. At some point everyone is going to use that as a defense (or maybe they have already) and the sec/courts/congress are going to have some work to do.

[medvezhenok]

It's probably intentional - securities fraud is a catch-all in the same way that tax evasion is an easy catch-all for all sorts of varied criminal activity which is much harder to prosecute.

[panarky]

It doesn't presume that shareholders are altruistic.

It presumes that shareholders' only objective is to maximize the share price.

From Wells Fargo's reports to investors, it's clear that management believed that investors would interpret successful diversity efforts as important to maximize the share price.

After the diversity rules were suspended, the share price dropped.

It's nearly impossible to prove cause and effect, but the plaintiffs don't have to prove direct causation. They only have to show that management misrepresented the facts in reports to investors, that the false statements were material, and that investors suffered a loss at that time.

[neilv]

How much is the stock movement a direct response to news like that, and how much is it someone gaming based on how others will react to news?

[nwiswell]

Can you elaborate on the distinction between these?

What is a "direct response"? Any change in price is still the result of individual actors expressing directional opinions.

[neilv]

Non-investor, and I was conflating too many concepts, but, very roughly: based on fundamental value of the business vs. only how others will react in buying&selling of the stock (and maybe even nudging others to react).

[nwiswell]

The "fundamental value of the business" is not an exact amount. The day-to-day variation in price (to the extent it isn't correlated to the index, anyway) can generally be viewed as a side-effect of uncertainty about what it actually is. In some sense, the value is unknowable, because it is a function of other things that are not knowable (e.g. future interest rates). So there's a measure of "other people would find an argument for this valuation reasonable", even for the fundamentals.

In any event, this sort of news generally does not move the fundamental value of the business in a way that exceeds the "uncertainty band", so pretty much all of the active trading is necessarily in anticipation of how others will view the news.

This is in contrast to e.g. merger offers, which are much more about the actual value of the business (which has suddenly become very concrete and precise), and not trying to judge the reaction of others. But major events like that are a small minority.

[lmm]

> Without journalists to expose the bad things in the first place the investors can do no such thing. There is no mechanism in place to discover these facts and there is no effort to build one independent of journalism.

Isn't that backwards? Investors are a major funder of journalism in the broad sense, and one of the few robust revenue sources left for it.

[akira2501]

> Investors are a major funder of journalism in the broad sense

I see it as an advertising driven industry. I'm not sure how investors could be funding it directly.

> and one of the few robust revenue sources left for it.

That there are publications meant for investors does not mean investors can be seen as the revenue source. The advertisers looking to get in front of investors are the source.

If someone was investing in news for it's own sake then why is the quality of the information presented so poor? You'd almost have an easier time making the case they invest to _intentionally_ obscure the process of reporting facts.

[lmm]

> If someone was investing in news for it's own sake then why is the quality of the information presented so poor?

Financial-oriented news tends to be noticeably better than other kinds. Often the best widely-published journalism in the UK will be in the Economist or the FT, for example, and some more specialised publications allegedly have even higher standards.

[TRiG_Ireland]

Unlike science news, financial news does not talk down to its audience.

[lazide]

The article is from Bloomberg, which provided high quality news feeds to investors and other market participants for high prices - $1000+.

This is part of their public articles.