FSA COMMITTEE
FSA NEWSWEEK
7th May 2021
ASX Shakeup: Companies Struggle Post-IPO
Adore Beauty, Nuix and Appen have crashed hard in the past week, depreciating on average around 20 percent.
The only retailer of the bunch, Adore Beauty, is down 46 percent from its Initial Public Offering (IPO) price, which was issued only 8 months ago. There were early concerns with the issue price of $6.75, which valued the company 181 times its forecast net profit in 2020. Another issue was that the prospectus forecast period only covered the 2020 calendar year, which was just 3 months beyond the float at the time. In a quarterly trading update released on Thursday, no profit guidance was provided in part responsible for the plunge to $3.69.
Adore Beauty has been on a downtrend over the last year (Source: MarketIndex)
Morgan Stanley, one of the leading managers on the IPO, expects market growth expectations to recalibrate lower. Investors have been caught out with a valuation using growth rates based on a one-off period in global history that was clearly uncertain to last, which even Adore was aware of, given the short prospectus forecast period provided.
Intelligence software firm Nuix had a similar story, with the stock falling from an IPO price of $5.31 to $3.68. Nuix downgraded its prospectus guidance recently as the business moves to a pay-as-you-use consumption model, contrasting the initially expected licensing revenue model.
Appen’s shares also plunged as CEO Mark Brayan presented an underwhelming report, mentioning the inconsistent customer behavior and stronger competition. The volatility of many tech stocks displays that the outlook for the post-pandemic market is still uncertain.
References:
https://www.afr.com/markets/equity-markets/reality-sinks-in-on-dim-day-for-shares-20210506-p57phl
IBM Announces Breakthrough In Chip Technology
IBM has managed to create a new 2nm computer chip in its lab which it claims can hold more energy for a given amount of space when compared to current 7nm chips. In this case, ‘nm’ stands for nanometers and typically lower ‘nms’ are associated with more efficient chips.
IBM believes these chips will improve performance by 45% over 7nm ones and that it will use 75% less energy for a given output.
This technology could see a number of benefits to consumer technology such as potentially quadrupling mobile phone battery life and reducing the need to charge them often. Moreover, it could result in improved performance for computers in general as it becomes increasingly adopted over the years.
The 2nm process chip is a big jump to an eventual, unprecedented level of technological capabilities
"We have seen semiconductor manufacturers moving from 14nm to 10nm to 7nm, with 7nm being a real challenge for some," says Peter Rudden, research director at the International Data Corporation.
He said IBM's new process could be used for AI uses that today need a second piece of tech - such as a powerful graphics card- to handle some tasks. The increased power efficiency could be useful in personal devices, while increased performance would benefit huge datacentres, he added.
"This also sends a message to the IT industry that IBM continues to be a hardware research powerhouse."
References:
https://www.bbc.com/news/technology-57009930
The views expressed within this article are those of the authors and do not represent the views of the Finance Student's Association. All images and references in this article are for fair and educational purposes only. The content in this article is not intended as legal, financial or investment advice and should not be construed or relied on as such.