The cure for low prices is low prices
Much grumbling here:
A major Currys investor has hit out at the “absurdity” of valuations on the London Stock Exchange as two more companies prepare to quit.
JO Hambro Capital, a top 10 Currys shareholder, criticised the dismal valuations the London stock market attaches to businesses, saying Currys should be worth far more than what investors have valued it at.
The electronics retailer is subject to a possible bidding war between suitors Elliott Advisors and China’s JD.Com. Currys recently rejected a 67p per share bid from Elliott, which valued the business at about £756m.
Hambro’s veteran fund managers, James Lowen and Clive Beagles, said an “acceptable offer” for the tech retailer would be closer to 100p per share, which would value the company at close to £1bn.
Someone with something to sell complaining about the low price a potential buyer is willing to offer.
Ho Hum.
As ever, prices in markets are information. We may not like the information on offer but that is the information the real world is supplying us with.
Fortunately, the system itself contains the cure to what apparently ails it:
The gloom over the London market intensified on Tuesday after one of its oldest constituents was also snapped up by an American buyer for £1bn. Spirent Communications, which has been listed since 1955, agreed to an all-cash takeover by US rival Viavi Group.
The British tech company works with companies like Amazon and Meta, testing their equipment. Shares surged 58pc to 172 pence, just below the takeover price.
It marks the fourth foreign bid for a London listed company in the last few weeks, following the Currys offers and bids for Wincanton and Direct Line.
The cure for low prices is low prices. Potential buyers note low prices, buy, and this pushes up prices.
The rest of us need do nothing other than observe. Or, the particularly brave might note the claims of low prices and get in there before the others do. But in terms of the system, rather than our individual reactions to it, nothing need be done. For markets do contain their own stabilisers, high prices are the cure for high prices - encouraging greater supply - and low prices cure low prices, encouraging demand.
We’re done, sorted.