Hello again:
I try not to get suckered into talking about daily stock market fluctuations, but I'll try to address the overall connection between news and stock price.
For Valeant:
When the offer was first made, Valeant shareholders were under the impression that they will get Allergan and it's awesome balance sheet cheaply and easily making it a great deal for Valeant. At that time, every indication that Valeant is making progress was viewed as reducing the risk of the transaction failing and thus making Valeant shares more valuable. The market reacted to each piece of merger-positive news by pushing Valeant's price up (and, conversely, down on each piece of merger-negative news). The fact that Valeant is trading now below where it was immediately after the bid was announced, implies that Valeant investors now believe less in the deal than they did then (either less likely to happen, or less profitable if it does). Arguable, some Valeant shareholders are getting fatigued by how long and how expensive this is turning out to be (and how it is keeping Valeant from doing what it's investors think it does best -- friendly mergers), and might no longer be excited with every merger-positive bit of news. Some Valeant investors have even stated that if the deal is doomed to fail, the sooner it does so, the better -- and might actually start acting in the opposite direction (push Valeant shares up on merger-negative news and down on merger-positive).
For Allergan:
For those Allergan shareholders who wish the transaction to happen, this is simply an arbitrage question: How much, at the current Valeant share price is the offer worth (today: $169)? How much is Allergan trading for (today: $165)? Therefore, there is a $4 profit to be made by buying Allergan if the deal happens. Any merger-positive news reduces the risk of making this $4 profit, and therefore acts to push Allergan's share price up. Even for those Allergan shareholders who think the company will be better off independent, the Valeant offer, for as long as it would last, provides a negative price support -- meaning Allergan, as an independent company, is forced to perform such as to have it's share price exceed the value of the Valeant offer or else.
Dan.
