What's happening at the various hedge funds that own AGN presently is a rigorous exercise to determine value post break-up as well as weigh the possibility of a new suitor stepping into the mix. Inevitably , the conclusion that will be reached is that Allergan is undervalued and remains a takeover target.
What is missing from this analysis is that the company is now tainted as the result of becoming a convenient target during an election year when candidates will undoubtedly turn their eye towards an issue that easily garners votes - corporate taxes. We can assume then that the market will begin discounting future earnings as opposed to placing a premium on them. That act of discounting tends to reinforce itself through a reflexive relationship that very often surprises on the downside.
When a stock breaks technically it's not simply a line on a chart going through another line giving a negative mechanical signal. It's a clear and concise message by the market. It's a message that the market will tend to discount future results regardless of how fundamentally pristine they seem to be. This is what creates value in the markets when the process is finished but it is also what creates value traps as naive fundamental only types buy the entire way down without a clear understanding of the process.
Worth noting and worth watching.
