When a firm is announcing that it is acquiring another firm, and when shares of both firms are traded on the market, share prices of the firms would move in different directions, depending on the views of the market regarding value transfer. What is the best interpretation when the price of acquirer's stock dropped by 20 percent, resulting in the loss of $40 million in market capitalization, while the price of target company's stock jumped by 40 percent, resulting in a gain of $20 million in market capitalization. 1. Value destruction and transfer of wealth from acquirer to target 2. Value destruction and transfer of wealth from target to acquirer 3. No change in value nor transfer of wealth 4. Value creation and transfer of wealth from acquirer to target 5. Value creation and transfer of wealth from target to acquirer