Holmes Sentence, Diploma Results, TRIG Announcement, Office Space Surplus and Gamification of Trading

It was good to see that on Friday Elizabeth Holmes, former CEO and founder of Theranos, was sentenced to 11 years in prison for fraud. The US company claimed to have a revolutionary blood testing device and raised $900 million when the product never worked and investors and customers were deceived. This is the kind of sentence that we should see in the UK but never do for companies that mislead investors.

This morning Diploma (DPLM) published their Final Results for last year. Both revenue and profits were ahead of forecast. This is a diversified engineering company which has grown both by acquisitions and organic expansion. With a bland company name and a low profile, this can be an under-appreciated business while it also benefited from a high proportion of export sales last year (a 5% benefit to revenue from foreign exchange movements).

Another announcement this morning was from The Renewables Infrastructure Group (TRIG) which is one of those alternative energy suppliers which the Chancellor recently targeted with a new tax as they were making too much profit. The detailed impact is now spelled out.

The new tax is a 45% levy on revenues in excess of £75/MWh. TRIG estimates this will reduce the company’s NAV per share by 8.3p per share, i.e. about 6%. But the company expects electricity price increases to more than offset that. The company will also see a positive impact from inflation but that is offset by a similar decrease in asset valuations which are discounted at a higher rate as a result.

The overall impact on the share price today at the time of writing is negligible but many of these changes were already forecast of course. This is an example of the problem of investing in companies or sectors where the government is interfering in the market. In this case the government decided to incentivise renewable electricity generation but then decided that companies were making too much money as a result.

An interesting article in the FT has highlighted the rise in empty office space as working patterns changed with more people working partly or fully from home. Occupancy levels have plateaued at about half pre-Covid levels and new construction has slowed. Offices can be repurposed to meet the housing shortage but that is not always easy the article reports. You can see why the commercial property sector is in the doldrums and that is surely not likely to change soon. I doubt people will return to the old working patterns now they have enjoyed the benefit of a lot less commuting, particularly in London. Personally I always hated commuting and avoided it so far as possible. Even after setting up a business initially in the West End, that was soon moved out to the suburbs freeing up two or more hours extra working time.

Lastly the FCA has warned against the “gamification” of trading apps. This is where product features are added to encourage activity. The FCA is right to look at this issue but as usual it is closing the stable door after the horse has bolted. It has been clear for many months that some share trading platforms are encouraging speculation as opposed to long-term investment.

Note: I hold shares in DPLM and TRIG.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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