Jan 15, 2013

Get Fact: what was the Whitehaven hoax really worth?

The claims that Whitehaven investors lost $300 million because of the ANZ press release hoax is rubbish. The figure is closer to $300,000, says Dr Alison Parkes from the University of Melbourne's Department of Accounting.

The mainstream media reported share market losses due to the Whitehaven hoax as being in the the vicinity of $300 million. But what does this extraordinarily large number represent and does it validly depict losses on the day?

Post-hoax, actions were described by the media as a drop in market capitalisation of $300 million. What’s not explained is market capitalisation is calculated by multiplying the share price by the total number of shares issued, to determine the market value of a company. So this $300 million “loss” was calculated by comparing the value of 100% of the shares at the lowest point on the day with the value of 100% of the shares at the highest point on the day.

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9 thoughts on “Get Fact: what was the Whitehaven hoax really worth?

  1. klewso

    How do they get these jobs as finance reporters?
    Get promoted for real good work in the horoscope section?

  2. Mark Edmonds

    Also, it is not possible to know how much the people who sold their shares during this dip actually paid for their shares in the first place. Presumably, it is possible that those who sold had benefited from share issues, bought cheap, or so forth. As such, they may not have lost money so much as lost the opportunity to sell at a greater profit, had they hung on until after the recovery. Another reason why the 300M is bollocks, and the 320K would be worst case!

  3. Andybob

    Good point and thankyou for making it. Only those who sold suffered a loss; after disclosure of the hoax the price recovered to a level broadly consistent with the long term trend. I doubt that those who lost would be cheered up by the fact that others profited; that argument spoils your better point.

  4. Mark Duffett

    Good to see a less ambiguous Fib-O-Matic.

  5. Microseris

    Thought Jimmy was going to have an aneurysm after Crikey’s previous story suggested $300M.

    No surprise then he doesn’t have 20 posts on this analysis.

  6. zut alors

    ‘It’s not real money, folks.’

    Exactly. This incident raises the question whether the MSM could even report a game of Monopoly accurately.

  7. Mark Duffett

    I’d still like to see Crikey run the Fib-O-Matic over the not entirely unrelated claim (by Crikey and The Global Mail, amongst others) that the people of NSW are net worse off as a direct result of the Obeid coal exploration licence scandal:

  8. [email protected]

    Brilliant article Alison exposing some terribly lazy reporting by the MSM.

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