Questions on the movie "Wall Street"?

Question

The question is based on the movie "Wall Street", starring Micheal Douglas (as "Mr. Gecko") and Charlie Sheen (as "Bud"). I watched the movie, but there are particular lines or scenes I did not understand, hope you people did.......

In the 19th minute, Bud says to Mr. Gecko that "A firm's breakup value is twice its market price". What does Bud mean? How will the employees of the firm react to the statement?

In the 33rd minute, Mr. Gecko says to Bud, "Why cant fund managers beat the S&P500? Because they are sheep!" What does Mr. Gecko mean by this kind of statement? How does it relate to market efficiency?

Answer 1

I was going to answer this -- then I realized that you should do your own homework.

Here are some things to think about: Suppose that you have a company like the small airline where the firm is actually worth more if you shut it down & sold their assets? It might be in the best interest of the shareholders to do that. Is it in the best interest of the employees?

Some forms of Efficient Market Theory say that no one can consistently beat the market. Many fund managers just want to replicate it (sheep) -- but others realize that the way to beat the market is to have better information than the market. How do you get better information? How did Gecko get better information?

Think about these things & do the work.