I will leave you with my own perspective of speculative investments in tech companies. I have decent experience investing in micro-cap technology companies.
Micro-cap technology companies are NEVER valued based on fundamentals. Quite frankly, at this end of the town, there is barely any fundamental metrics available to accurately analyse it.
Investments in speculative stocks are based purely on future potential, management’s credentials, and their track record of achieving milestones, either in the same company, or in their previous tenures.
If the sector is hot, management set and achieve clear milestones, show progress towards the goal QoQ and YoY, then you’re onto a winner.
There’s too much talk of valuation and people predicting, like pros, about where the SP might end up in a few weeks.
Let me be absolutely clear. The SP rocket to 24c not because the market valued the stock at $250mn, it is because the market didn’t want to miss out on a hot stock, in a hot sector.
Similarly, the SP isn’t dropping because of the market cap. Nobody cares about the market cap. The share price is dropping because traders are bored due to the lack of hype creating announcements, a broader fear about a stock market crash, and moving funds to other stocks that are hot right now.
Do as much research as you like on competitors, peer evaluation, etc. It will all go out the window, if a price sensitive announcement comes tomorrow. Regardless of what you’re research says, the SP may even go as high as 100% on what you may consider a nothing news.
That is speculative markets for you. My advice would be to not worry too much about the finer details. They contribute very little to the SP. Just go with the flow and take calls on whether to Hold or Sell purely based on your risk appetite and conviction.
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