No, I am not referring to
the Charles Dickens classic. I am referring to what happened in
The Malta Independent of Sunday carried a front page article titled “Investors ‘may get hurt’ by Maltacom’s spiralling share price”. Even if the article did not contain anything substantial, which of course it did, the title was enough to move a thin market like ours, so much so that up to the time of my writing this piece, the market in Maltacom shares turned down, protected only from sharper falls by the trading range set daily by the Malta Stock Exchange.
It is not the purpose of my contribution to agree or disagree with what the editor of The Malta Independent on Sunday carried on this matter as front page news. However, it is important that certain questions be asked in the pursuit of and in the interest of transparency in
The whole rationale of the article was based on a premise that “it is generally thought the share price (of Maltacom) at the beginning of the privatisation process (Lm 1.39) was a ‘fair price’… (but) the present price (Lm2.20) does not reflect the real worth of the company”. The article goes on to quote an unidentified source, which states that although “Maltacom made significant progress in curbing expenditure and re-structuring its efficiencies, it has invariably not registered any major or strategic breakthrough which can justify such dramatic increase in its share price”.
I find this quoting unidentified sources more than a bit unorthodox and to my mind goes against the letter and spirit of the stipulations of the Prevention of Market Abuse Act 2005, which came into effect last year. This places on journalists the obligation to be prudent when expressing opinions on market valuations and to disclose clearly their source and ensure that it is qualified and licensed to express such opinions. Quoting unidentified sources could lead to hidden agendas that could involve market abuse, especially in the process of privatisation where bidders have every interest to acquire Maltacom on the cheap to the detriment of government and the nation at large.
In fact, what amazes me and gives rise to further suspicion on the genuineness and objectivity of the opinions of the unidentified sources, is that what has been said about the Maltacom share price applies many numerous times more forcefully to the share prices of most financial services organisation quoted on the Malta Stock Exchange. Yet no word and no front page articles how investors ‘may get hurt’ from such investments as was done in case of Maltacom.
I think that in the interest of transparency it is imperative that the privatisation process of Maltacom be conducted with less secrecy so that investors can make their buy, sell or hold decisions on the basis of official information, prudently placed in the public domain, without jeopardising the competitive bidding process.
Now let us compare this to what happened in the other city. Google shares have been a hot story in the financial markets. Since its initial public offering at $85 in August 2004, the price skyrocketed to a peak of $475 per share late last year from where it retracted to $365 by the end of last week.
At the end of last week, Google sported a market capitalisation of $110 billion, rendering it the 18th largest company in the
Last weekend, a very respected investors’ magazine, Barrons, carried a special feature on Google and expressed doubts on the feasibility of such market expectations (collected by Thomson Financial after polling financial analysts, as Google itself, unlike the normal practice, does not issue any market guidance about its future earnings).
Barrons consequently hypothesised a scenario where Google’s reported earnings in 2006 and 2007 will be below market expectations and consequently its share price could be scaled back down to earth to a range between $188 and $257.
On Monday, Google shares reacted by falling five per cent to $345 and reaction to the Barrons article was as usual split between the bulls, that maintain a price target of $500 for Google in 2006, and the bears who went along with Barrons views. What was sure however was that no one quoted opinions expressed by unidentified sources. On the contrary, every opinion was not only fully attributed to an identified source, but such sources had to disclose all interest they can have in Google shares.
It is one reason why I always sign my name when expressing an opinion about market valuations and try to give technical reasons for my judgement. And also why, as a matter of principle, I refuse to have a personal interest in the local investments I advise on to ensure that my opinion remains objective and not motivated by any market movements that could result from such opinions.
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