Efficient Market Theory Poof!
Something that puzzles me a lot is the valuation of some large cap stocks.
We all heard of the efficient market theory but I'm thinking of stocks like BP, Vodafone, even the latest Royal Mail IPO or Tesla and Facebook.
Take Vodafone. They just sold Verizon Wireless to Verizon for U$130bn, and yesterday has a market cap of U$170bn. It seems badly priced. Worse if you think 3 months ago when it's market cap was U$140bn (U$10bn for their non-US, global, operations and assets, including a UK 3G license they paid U$10bn for and cash - granted they have GBP40bn in debt)!! Now AT&T wants to buy up Vodafone, sending shares even higher. I mean who wouldn't at this silly valuation?
Can it be true that this Verizon deal that has been on the cards for the last 10 years could lead to their top shareholder, Neil Woodford, the best rate fund manager in UK with the largest fund in the UK to dump all his Vodafone shares (that he held more the donkey years) about 3 months before the deal is announced??? He has since quit the fund about a month after the Verizon deal is announced. Shocking.
Take Royal Mail. Gov allegedly wants to offer as "gift" to their city mates. So came up with a plan to IPO to joe public for 260-330p knowing full well that a opening "pop" would cause all the Joes to sell (btw that's pre-trading i.e. only their city mates could buy). They call it fair because Joe got a shot at IPO but who got the all shares on the cheap? Royal Mail might have poor profitability but they own prime real estates in city centers that dwarf their operations! Silly of me to sell at 450p when today trading at 560p. Gov still owns 40%. Their mates got the 60% on the cheap legally and in fairly good PR.
The opposite like Tesla and Facebook seems to be so overvalued it's like each car and user is worth millions! There's only so many cars Tesla can make (in fact their profit mainly comes from green tokens that California gov give them!) and so many ads Facebook can overwhelm you with before all you see is ads and no friends right?
What I'm getting at is some simple information seems to be spin around and twisted to the public and some obvious valuation flaws seems to go against the "Efficient Market Theory".
We all heard of the efficient market theory but I'm thinking of stocks like BP, Vodafone, even the latest Royal Mail IPO or Tesla and Facebook.
Take Vodafone. They just sold Verizon Wireless to Verizon for U$130bn, and yesterday has a market cap of U$170bn. It seems badly priced. Worse if you think 3 months ago when it's market cap was U$140bn (U$10bn for their non-US, global, operations and assets, including a UK 3G license they paid U$10bn for and cash - granted they have GBP40bn in debt)!! Now AT&T wants to buy up Vodafone, sending shares even higher. I mean who wouldn't at this silly valuation?
Can it be true that this Verizon deal that has been on the cards for the last 10 years could lead to their top shareholder, Neil Woodford, the best rate fund manager in UK with the largest fund in the UK to dump all his Vodafone shares (that he held more the donkey years) about 3 months before the deal is announced??? He has since quit the fund about a month after the Verizon deal is announced. Shocking.
Take Royal Mail. Gov allegedly wants to offer as "gift" to their city mates. So came up with a plan to IPO to joe public for 260-330p knowing full well that a opening "pop" would cause all the Joes to sell (btw that's pre-trading i.e. only their city mates could buy). They call it fair because Joe got a shot at IPO but who got the all shares on the cheap? Royal Mail might have poor profitability but they own prime real estates in city centers that dwarf their operations! Silly of me to sell at 450p when today trading at 560p. Gov still owns 40%. Their mates got the 60% on the cheap legally and in fairly good PR.
The opposite like Tesla and Facebook seems to be so overvalued it's like each car and user is worth millions! There's only so many cars Tesla can make (in fact their profit mainly comes from green tokens that California gov give them!) and so many ads Facebook can overwhelm you with before all you see is ads and no friends right?
What I'm getting at is some simple information seems to be spin around and twisted to the public and some obvious valuation flaws seems to go against the "Efficient Market Theory".
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