ELi5 : Why does the stock of a company fluctuate when it is involved in a controversy?
In: Economics
Usually it’ll cause people to sell shares because they don’t want to be associated with the company or they think the bad PR will hurt sales. When enough people sell shares, the price of a share goes down because there’s less demand. Some people will see the price go down and think “this company will probably just bounce back from this, no one cares about bad PR for longer than a day.” So, they’ll buy the dip, hoping to make a lot when it bounces back, and when enough people buy shares, the price goes up due to demand.
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