The value investing in start ups
As a value investor, I keep wondering about the pricing of the new startups rising around the world.
As a value investor, I keep wondering about the pricing of the new startups rising around the world.
The valuation of these "baby posters" start ups is really becoming expensive and pricey although these same ventures are achieving net losses like no other. Even by using VC valuation mechanics (real options valuation, Black Scholes valuation), these start ups are hilariously valued.
If we marked the valuation of Uber ($67 billion) to market and assumed that this is the real market cap, then we need at least 6 billions in NET profit to achieve only and only 10% of return on this market cap! ETFs and hedge funds can achieve just return in one quarter... easily! (and we are talking about VC investing which on average should produce an IRR of 30% on average)
While being taught about Carl Icahn methodology "the Icahn manifesto", I studied an analysis that was being done on investing in pricey (growth) stocks and cheap or fair priced stocks and I found out that the latter has a spread over the former with at least 7+% in annual returns!
Sadly, VC investing is becoming day by day as kind of glamour investing (which "brand" should we invest in regardless the numbers) and not only on states, but rather everywhere. I personally hope that there is no bubble coming!
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Eighteen years in investment management, M&A and financial technology. A CFA Charterholder, he leads investment analysis, valuation and fund structuring across Significa's advisory and investment practices, and teaches valuation and fund structures in the CVC Builder curriculum. Concurrently Chief M&A and Growth Officer at AlternativeSoft in London; co-founder of MarkeScope, which developed the first stock-screening solution to incorporate risk measures. Treasurer of CFA Society Egypt; BSc Electrical, Electronics and Communications Engineering, Cairo University.