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From Reuters:
NY state pension to sue BP for investment loss | Reuters
IMO, even as the drop in BP's stock price has been severe, this is a lawsuit that deserves to be tossed out of court. To be blunt, it is frivolous.
Investors purchase instruments with the understanding that such instruments are not risk free. They take on risk in the pursuit of higher returns. Sometimes risks--macroeconomic developments, accidents/natural disasters/supply or production disruptions, industry decline, bad choices by management, etc.--play out with severe drops in share prices. There is no indication that the decline in BP's share price was on account of company fraud. Instead, it deals with developments related to a terrible accident.
If this lawsuit is allowed to be pursued, it would set a dangerous precedent by which any investor could sue a firm when its stock price declines. That would create substantial uncertainty in the markets and have an overall negative impact.
IMO, NY's pension fund is merely responding in an environment in which the State and its pension fund are under growing financial pressure. Nonetheless, that harsh environment is not sufficient justification for such a lawsuit.
New York state's pension fund plans to sue BP (BP.L) to recover losses from the drop in the company's stock price due to its "disastrous" oil spill, Comptroller Thomas DiNapoli said on Wednesday.
NY state pension to sue BP for investment loss | Reuters
IMO, even as the drop in BP's stock price has been severe, this is a lawsuit that deserves to be tossed out of court. To be blunt, it is frivolous.
Investors purchase instruments with the understanding that such instruments are not risk free. They take on risk in the pursuit of higher returns. Sometimes risks--macroeconomic developments, accidents/natural disasters/supply or production disruptions, industry decline, bad choices by management, etc.--play out with severe drops in share prices. There is no indication that the decline in BP's share price was on account of company fraud. Instead, it deals with developments related to a terrible accident.
If this lawsuit is allowed to be pursued, it would set a dangerous precedent by which any investor could sue a firm when its stock price declines. That would create substantial uncertainty in the markets and have an overall negative impact.
IMO, NY's pension fund is merely responding in an environment in which the State and its pension fund are under growing financial pressure. Nonetheless, that harsh environment is not sufficient justification for such a lawsuit.