This morning saw the share price of Sondrel (SND) collapse by over 60%. It only listed in October 2022. Revenue forecasts are shot and losses will no doubt be substantial. This is what Camtab had to say on it on Stockopedia: “I am just amazed that people wonder why the City of London is losing credibility in the world. Sondrel are a fantastic example of the duplicity, stupidity and greed inherent. Float October 22 mentioning semi conductor (oh must be good then!) lots of prospects (brilliant) loads of opportunity (great!!). Less than a year later a profits warning on this scale. I gave up investing in IPOs years ago recognising that you only list on UK markets now if its a sh&tshow. Sorry to be so down about but it is so depressing and I don’t think people do hit brokers or markets enough for devaluing one of our main income providers in this country. Still keep devaluing it on this scale and we can always fall back on our resources (oh!) well we have some fantastic multi-national businesses (didn’t we sell those to someone)…………oh, well perhaps we could bottle fresh air then”.
There are several key messages here: 1) never trust a company with a volatile financial history; 2) recurring revenue is very important; 3) the semiconductor market is particularly tricky due to rapid obsolescence; all IPOs are risky as it’s easy to spin a good story about future prospects.
This was a company lined up to fail in my view and could well now be taken private again. Why do people invest in such dogs? Because there are lots of people who are suckers for a good tale is the reason.
The other surprising news today was the promotion of Grant Shapps to Defence Secretary. Someone who had made a hash of his previous job of Transport Secretary by promoting LTNs and then backtracking when they proved so unpopular (and impractical), a supporter of the impossible Net Zero policy and managed to change jobs so rapidly that his mistakes never caught up with him. His profile on Wikipedia also makes for interesting reading.
UK politics is beyond salvation if Rishi Sunak could not find someone better to take on the job.
Roger Lawson (Twitter https://twitter.com/RogerWLawson )
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Transport Minister Grant Shapps has announced his candidacy for the position of Prime Minister and with two others yesterday the field is getting quite crowded.
But Shapps has a very poor record as Transport Minister. Among his negative contributions has been the promotion of Low Traffic Neighbourhoods (LTNs) to tackle the Covid epidemic – a totally misconceived policy and implemented without local consultations; support for HS2 – an enormous white elephant; a rewrite of the Highway Code which makes some people more equal than others on the road; a £2 billion investment in cycling and walking to promote “active travel” and “behaviour change” and he keeps bailing out Transport for London (TfL) allowing Sadiq Khan to continue to run an uneconomic service instead of reforming it. His response to the national rail strikes has also been to line up for a fight with the unions while committing £1 billion to “modernisation” of the railways; basically throwing more money at an uneconomic and outdated transport technology.
Meanwhile the road transport network gets ever more congested and drivers pay ever more in taxes and road charges such as in CAZ and ULEZ schemes.
I certainly would not support Shapps for Prime Minister. But what of the other candidates? A number wish to cut taxes. A laudable policy but to be able to do that without increasing public borrowing means a reduction in public expenditure. None seem to be promising that (for example Shapps wants to spend considerably more on defence).
We would all like a cut in the price of diesel/petrol which might help to stimulate the economy as high prices impact the delivery of goods and services. But most of the increase of late has come from the market price of oil not from taxes (Fuel Duty rates have actually been reduced recently).
Rishi Sunak seems to be one of the few candidates who is wisely not promising hand-outs to the electorate if he gets the job.
But no doubt we will learn more about the other candidates over the next few weeks. As in previous Conservative Party elections, it may be a case of who avoids the most gaffs and who is least disliked by MPs that wins the day. Boris Johnson only got the job because he seemed likely to break the deadlock over Brexit but there should surely be no rush to appoint a replacement.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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