COLLAPSE

ABC Corp and XYZ Corp are are publicly traded companies, that is, investors can trade (buy and sell) shares of these firms via a stock exchange. ABC Corp. releases its financial statements, on the evening of Jan. 1, 2020, for the quarter ending in Dec. 31, 2019, and reports $1 billion in net income. XYZ Corp, on that same evening, releases its financial statements for the same period and also reports $1 billion in net income. What is strange is that after the release of financial statements, the next morning, ABC Corp. sees its stock price go up radically while XYZ Corp. sees a sharp decline in its stock price.

Question: Now, what does that mean? Is financial statements irrelevant in terms of determining stock price? Who uses financial statements? Is it even useful for investors after all?