The investor who observes closely loses less money – an ancient NotHarry proverb.

I read that Uber lost a billion dollars in the last 3 months (as usual) but is going to be valued at 76 billion dollars when (if?) it floats on a major stock market.  Those two pieces of data do not equate under any system of logic or financial analysis and anyone who invests in the shares on the basis of Uber’s financial performance ought to be having some tests for dementia.  The fact that the business had a period without a chief financial officer running to 3 years is also pretty frightening.

It brings to mind the security company Baltimore Technologies (from Ireland) that listed on the UK stock market during the ‘dot.com’ boom and went into the FTSE 100 at a valuation of GBP13 billion almost 20 years ago, even though it made a minute profit and had in reality only one product that naïve investors thought was an essential to the future of the internet.  The product was good but not that hard for others to improve on.

The shares went from GBP15 to 37p in no time at all.  Small shareholders were then further stitched up (in my opinion) in a corporate raider’s re-organisation.

If ever there was an event that told me not to invest in technology businesses at the end of the last Millennium, it was that ridiculous market listing.  I didn’t and my well-advised clients didn’t either, unless it was on their own whim.  Sometimes a small road sign saying you are about to drive over a cliff is best spotted and acted upon.  It is no good driving too fast and not taking time to look around just because everyone else is and you feel a need to keep up.  The collapse of that part of the market had a domino impact on wider Western stock markets too.  Many people lost very large amounts of money.

Excessive stock market valuations of business that aren’t making a profit but are supposed to be offering something ‘new’ or ‘essential’ is common at the moment.  I would say that is the old road sign being dusted off and put out to warn the observant of major hazards to come.  I recommend at least checking the brakes.