During older bull markets, such as the one we have recently experienced, there are inevitably investors who are frustrated that they haven’t participated fully. Like a cheer squad, they urge their brokers to find the next big thing. This enthusiasm is eventually transmitted into share prices and if momentum can be generated, it can feed on itself. Towards the very final stages of a bull market some very strange behaviours can be observed.
Witness, for example, the surge in the share price of the New York company, The Long Island Iced Tea Company. The only thing it did to trigger exuberance was to change its name to Long Island Blockchain. And when Kodak announced it was creating a cryptocurrency, its shares also surged. More recently, in the UK, AIQ Ltd raised GB£3.6 million by issuing 50 million shares at 8 pence each on the London Stock Exchange, giving it a market capitalisation of GB£4 million. Just two days later, AIQ was trading at 125 pence, or more than 15 times its listing price. In AIQ’s case, there was no announcement at all.
Australia is not immune to the migration of sentiment from enthusiasm to irrational exuberance. Companies with very little profit, and in some cases very little revenue, have been trading at market valuations approaching a billion dollars.