Far East Capital Newsletter
These battery anode stocks are looking overpriced
21 Nov 2021

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These battery anode stocks are looking overpriced

The market continues to be strong for capital raisings as many companies are going back to the well again. That is good for the stockbrokers who have their distribution lines established but it is not always good for pre-existing shareholders. We are seeing many instances of underperformance of share prices once the raisings have been completed. In fact, it seems that the best strategy may to be sell when there is a raising and coming back later, after it has been digested. For those who are not shareholders, buying opportunities may come along later, at cheaper prices. Yet, when a placement is being undertaken, the brokers love to tell how there is strong demand, forcing them to impose heavy cutbacks. The process can be quite deceptive. The ASX should stop companies announcing that placements are "heavily oversubscribed" because that is both meaningless and misleading owing to the process whereby brokers encourage overbidding.

The flood of IPOs is continuing as well. There is plenty of money going around but it needs to be herded into the coffers. The successful ones will be those where effective salesmanship creates demand rather than a relative valuation approach. It is FOMO that gets these over the line and that is more about perception than fundamentals.
 

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