Walking in the City of London right now you feel like this is the midst of another boom. Cranes are everywhere, new skyscapers are popping up everywhere. The newspapers are full of stories of booming house prices, gazumping, a glut of foreign buyers. News this week that mortgage lending is back to pre-financial crisis levels. It all feels so familiar to where we were before the boom and bust of the sub-prime crisis in 2008/2009.
Equity markets are close to all time highs. Big deals are plastered across the newspapers every day illustrated by the WhatsApp acquisition by Facebook for $19 billion. It feels like back to the “good old” days of 1999 during the Dotcom boom and then bust.
This week there was more evidence of a rush to risk with the shares of AO world (the owner of the website Ao.com) climbing more than 40% on their London Stock Exchange IPO as investors piled with the offer being heavily oversubscribed.
The Online washing machine and household gadget retailer with a 24% share of the UK domestic appliance market had an offer price of 285p and climbed to over £4.12 in early afternoon trading in London, valuing it at nearly £1.7bn. Today the share price sits at £3.56. Founder and Chief Executive John Roberts reduced his stake of about 40% to 28.6% in the sale, meaning he made £137 million immediately and giving him close to a half a billion pound stake in the company on the first day of trading.
Then there is Tesla Motors, the Nasdaq listed electric car manufacturer that at $256 is valued at $31 billion which compares with the $60 billion market cap of General Motors. Unlike GM, Tesla will only sell 35,000 electric cars this year compared with 10 million for General Motors in 2013. The shares have popped this week as news of their $5 billion Gigafactory lithium ion cell factory were announced. The company’s current model, the Tesla S, has a starting price of $69,000.
Tesla has gone from a 52-week low of $34.25 with a 344% increase in 2013 and 70% gain so far in 2014
Morgan Stanley’s Adam Jonas said that “Tesla’s quest to disrupt the trillion-dollar car industry” with the Gigafactory gives it an opportunity to also disrupt the trillion-dollar electric utility industry. Jonas raised his price target on Tesla to $320 per share on Thursday, up almost 30% from current levels. “If it can be a leader in commercializing battery backs, investors may never look at Tesla the same way again,” he said.
Will it all end in tears? Maybe, but the pressure is on. Who will be the last to leave the dance floor? For now, plenty are making money from highly inflated share prices in tech, biotech, solar. Over exhuberance is par for the course for financial markets, remember the Tulip bubble of 1637 and the South Sea company bubble of 1720. We never learn!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
AO World and Tesla Motors shows appetite for risk growing – another Tulip and South Sea company bubble?
Feb 28, 2014 at 12:01 pm in Market Commentary by contrarianuk
Walking in the City of London right now you feel like this is the midst of another boom. Cranes are everywhere, new skyscapers are popping up everywhere. The newspapers are full of stories of booming house prices, gazumping, a glut of foreign buyers. News this week that mortgage lending is back to pre-financial crisis levels. It all feels so familiar to where we were before the boom and bust of the sub-prime crisis in 2008/2009.
Equity markets are close to all time highs. Big deals are plastered across the newspapers every day illustrated by the WhatsApp acquisition by Facebook for $19 billion. It feels like back to the “good old” days of 1999 during the Dotcom boom and then bust.
This week there was more evidence of a rush to risk with the shares of AO world (the owner of the website Ao.com) climbing more than 40% on their London Stock Exchange IPO as investors piled with the offer being heavily oversubscribed.
The Online washing machine and household gadget retailer with a 24% share of the UK domestic appliance market had an offer price of 285p and climbed to over £4.12 in early afternoon trading in London, valuing it at nearly £1.7bn. Today the share price sits at £3.56. Founder and Chief Executive John Roberts reduced his stake of about 40% to 28.6% in the sale, meaning he made £137 million immediately and giving him close to a half a billion pound stake in the company on the first day of trading.
Then there is Tesla Motors, the Nasdaq listed electric car manufacturer that at $256 is valued at $31 billion which compares with the $60 billion market cap of General Motors. Unlike GM, Tesla will only sell 35,000 electric cars this year compared with 10 million for General Motors in 2013. The shares have popped this week as news of their $5 billion Gigafactory lithium ion cell factory were announced. The company’s current model, the Tesla S, has a starting price of $69,000.
Tesla has gone from a 52-week low of $34.25 with a 344% increase in 2013 and 70% gain so far in 2014
Morgan Stanley’s Adam Jonas said that “Tesla’s quest to disrupt the trillion-dollar car industry” with the Gigafactory gives it an opportunity to also disrupt the trillion-dollar electric utility industry. Jonas raised his price target on Tesla to $320 per share on Thursday, up almost 30% from current levels. “If it can be a leader in commercializing battery backs, investors may never look at Tesla the same way again,” he said.
Will it all end in tears? Maybe, but the pressure is on. Who will be the last to leave the dance floor? For now, plenty are making money from highly inflated share prices in tech, biotech, solar. Over exhuberance is par for the course for financial markets, remember the Tulip bubble of 1637 and the South Sea company bubble of 1720. We never learn!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.