It is a common occurrence that when a publicly traded company announces plans to acquire another publicly traded company the “value” of the acquiring company decreases, while the value of the company to be acquired increases. For example, when Oracle Corporation announced its proposed acquisition/hostile takeover of PeopleSoft, the value of Oracle’s stock steadily declined for the nearly 18 month battle while PeopleSoft stock rose $5.1 billion! This seems to occur in spite of whether investors and analysts believe the acquisition will be profitable to the expanded company or not. It is understandable why the public would invest in the company to be acquired- they will usually be paid a premium for their shares. What I question is why the public would believe the acquiring company is so much more worthless because it is venturing to expand. It seems that Wall Street must believe that the economies of scale have reached a saturation point. Of course, there are inherent risks when a large purchase is made. The integration may not be smooth, but in the long run why would the public believe that expansion is devaluing?