The rout in AI stocks in South Korea last week prompted this insight.
It looks like the UK heatwave may be about to break. Indeed it may have broken by the time this email reaches you. Extreme friability in nature, (those terrible wildfires are very distressing), appear to be translating into very friable equity markets at the moment. The old adage of “Sell in May and go away” might this year prove to be the one that was prescient.
Of course lower volumes of trading because of the holidays can impact on markets during the summer, but politics is not quiet and the AI story will be a recurring theme until there is a crash – there will be one, one day. And I am definitely not the one who has competency to call the top of that market.
All of this means that stock prices will be more volatile
Why should Athla as a valuations specialist care about day to day volatility in quoted markets when most of what we do is the valuation of private companies. The answer is simple. We frequently rely on adjusted quoted comparable company data as one of the methodologies we use to triangulate a valuation. And as you know you always prepare a valuation on a specific day. So if stocks are shooting up and down by a significant % from day to day, establishing a valuation that can be relied on now but which will also stand intense scrutiny many years hence (perhaps from a trade buyer or HMRC), it matters. There are many ways to deal with the issue of course. And even if some sectors are volatile others remain calm, so a bespoke approach is needed each time (with valid arguments).
If you have a company that needs to be valued and is in a sector where the valuation issue is not “stable,” we can certainly assist you in making sure that the number produced is not just a “number”, but a suitably qualified number with an evidence base that is deep and expert.
(We do the same for stable companies too!)
In recent weeks there has been an interesting and positive development in our valuations business. We are getting more and more work where there is a complex waterfall which in turn has all sorts of interesting impacts on the value of the equity stack. We are also starting to take on work where we are being asked to examine historical valuations and opine. I am pleased to announce that we can now take on this type of work as we have access to the relevant historical databases of valuation data which make it possible. So if that is an issue facing one of your clients – whether in corporate or family law or indeed around a historical transfer of shares by founders which at the time was not fully documented, we can now assist you.
Meanwhile I hope those of you who are returning from holiday have a great working environment during August and for those of you who are about to disappear – enjoy your break.
We remain open for business with capacity to take on work (including urgent projects), throughout this period. Just call or email any of us on the numbers/at the addresses below.
PS Next week’s insight will be worth a read. With the Clacton by-election taking place we will be examining how to value a dustbin!
