Note for Spud

UK tech start-ups and the next rung up, so-called “scale-ups”, secured £12.4 billion in venture capital funding in the first five months of the year, with a record £9 billion being raised in the first quarter of the year alone. This puts the UK second only to the United States in terms of start-up investment, and ahead of China.

This is where investment in new things happens. Stock markets are where the successes can be cashed out. The existence of the ability to sell those second hand shares on the stock market is what incentivises these investments in new things.

To increase homegrown sources of funding, the government’s most recent digital strategy paper said it was proposing to relax rules preventing UK pension money being invested in riskier funds such as venture capital, something that has been debated for years.

Of course Spud will be against that, won’t he?

9 thoughts on “Note for Spud”

  1. How much of the market is manipulated though, just momentum traders moving prices through short and gamma squeezes, pump and dump schemes, attempted corners, etc.?

    Why do traders joke that the answer to the question, what are fundamentals? is “whatever does not move price”?

  2. Of course Spud will be against that, won’t he?

    If only for the fear that someone somewhere might make a profit.

  3. Ritchie’s view on venture capital can be found on his old cv
    http://www.t*xresearch.org.uk/Documents/RichardMurphycvJuly2006.pdf

    Infernet Limited (now whereonearth.com Limited)– CFO – 1997 to 1999 – Internet company developing geo-spatial data-basing techniques for search engines Helped create the concept of whereonearth with CEO Steve Packard and joined him on the board to guide early fund raising and the purchase of critical subsidiaries to lock in the IPR that has been the basis of this company’s development before making way for full time staff. The company was sold to Yahoo in 2005 for £28 million (most of which benefited the venture capitalists)

  4. “Infernet Limited (now whereonearth.com Limited)– CFO – 1997 to 1999”

    As always, Spud somewhat exaggerates his involvement and importance. He was director from March 2018 to September 2019.

    He held 1,000 shares in the company as at August 2019 out of an issued share capital of 227,770 (0.43%)

    There was a 100/1 share sub-division and a lot of investment the following year and as at August 2020 spud held 100,000 of 30,841,061 (0.3%)

    There were share options in place and at the time of the sale to Yahoo Spud held 400,000 out of 52,566,451 shares in issue or 0.76%. He would have to have paid c£60k to exercise his options

    If the sale price was £28m that implies Spud got £213k from the sale. Given that his involvement as director had been for around 18 months and six years before the sale, you’d think he’d be grateful.

  5. @rsm
    What you’re talking about is a guaranteed way to lose a great deal of money. Any market is the collective opinion of the sum of the players in it. The only way to make money is to anticipate that opinion & be there first. So if speculation moves a price, it’s only anticipating what would occur anyway. Unless the speculator got it the wrong way round. In which case, ouch.

  6. @Andrew_C, excellent sleuthing, well done.

    In 1997-1999 he was a partner of Murphy Deeks Nolan, difficult to see how he would have been able to be a CFO at the same time. My guess is the company was very small and he was the bookkeeper.

    £213k isn’t bad for a bookkeeper though!

  7. @bloke in spain

    《Any market is the collective opinion of the sum of the players in it.》

    What enforces rationality in such an opinion?

    Can I quote Fischer Black again?

    《we might define an efficient market as one in which price is within a factor of 2 of value, i.e., the price is more than half of value and less than twice value.11 The factor of 2 is arbitrary, of course. Intuitively, though, it seems reasonable to me, in the light of sources of uncertainty about value and the strength of the forces tending to cause price to return to value. By this definition, I think almost all markets are efficient almost all of the time. “Almost all” means at least 90%.》

    And:

    《I think that the price level and rate of inflation are literally indeterminate. They are whatever people think they will be. They are determined by expectations, but expectations follow no rational rules. If people believe that certain changes in the money stock will cause changes in the rate of inflation, that may well happen, because their expectations will be built into their long term contracts.》

    So, isn’t that collective opinion fickle, arbitrary, and as prone to manipulation as political opinions?

  8. rsm, you seem to be saying both that the markets are fickle and unreliable, as well as being capable of reliable manipulation. That’s not really possible.

    In the end most of the traditional markets are based on ROI, factoring for risk. You aren’t going to scare pension funds into selling Shell by trying and sort of pump and dump.

    The proof of whether markets can be reliably manipulated is who makes money. Short sellers with good analysis can, and do. Those scouting for undervalued assets can, and do. Those looking to break up unfunctional companies into separate assets can, and do. Those in the game of manipulating the market, not really — reality always returns to bite them, eventually.

    There are some markets that are not heavily based in reality, have inexperienced owners and are low capital. Say some crypto. I expect that some people have made money with manipulating them. Right up to the time they are wiped out by the fickleness (because they have no base in reality).

    Where are all these really rich people who have made it by manipulation. And, more importantly, why are you not one of them?

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