THE TECH STOCKS BUBBLE BURST RISKS TO BE QUITE LARGE AND UNFORESEEN FOR ITS MAGNITUDE AND REVERBERATION ACROSS MARKETS, ON A SCALE OF A -50% DECLINE IN EQUITIES ACROSS THE SPECTRUM AND ASSETS CLASSES.
The ongoing stock market bubble has no rationale, serves no purpose rather than pure misallocation of capital with speculation of all sorts; while sees the SPACS furore financing, listed companies with no revenues, total outstanding liabilities towards shareholder, with the promise of future revenue streams through acquisitions.
The explosions of stocks with metrics out of skew, astronomical price/earnings ratio have been the confirmation of a widespread stocks mania from the smallest retail investors up to the largest assets managers, that have supported an extremely fragile stock market structure where the majority of Assets Managers, equities funds, large Institutional insurance and pension funds, synthetic ETFs have all piled in Equities/stocks, where the most weight of portfolios has been allocated on the largest capitalized Tech stocks, creating, therefore, an heightened financial stability risk. The financial engineered scheme of increasing,without measure, the scale of equities issuance and equities finances for stock market publicly listed companies, has allowed the overlap of financing activities raising cash with stock issuance with the real net cash flow in the balance sheets of many companies, thereof substituting and in many cases inflating the real cashflow, liquidity and solvency stance in many Stocks, with cash raised by stock issuance. Tech Stocks, with all the pletora of new IPOs and newly listed companies that often need to dilute the shareholder base in order to raise cash, given that the organic net cashflows could often be negative, or loss-making companies, have this typical financing scheme through Equities and common stock issuance, on top of corporate debt obligations, making the accountancy balance sheet trick of assimilating cash&similar to cash raised by stock issuance, thereof, not real cashflow derived by net incomes for these companies. Wonder why they have all gone nuts for noncash investments as Bitcoins and cryptocurrencies, these are the typical features of a dangerous irrational stock market speculative bubble.
EV Company metrics, stock P/E Ratio 1,388 compared to an average 8.96
How and Why the Price/Earning ratio can be so higher and out of skew?
The current Assets on balance sheets are $26.7 bln Dollars, worth to notice that CASH & Equivalents are $19.3bln Dollars.
Going through the income statement becomes evident that Cash&Equivalents $19.3bln do derive, in large part, by the issuance of CommonStock for $12.2bln Dollars, while also the additional $334mln dollars in Foreign Exchange Effect could be due to offshore investments in Asia, thereof the exchange rate surplus.
Total current liabilities amounted in 2020 for $14.2bln Dollars, the total liabilities amount in 2020 has been $29.9 bln Dollars, of which $2.2bln in Capital Leases, $9.6bln in long term debt and $3.85 Accrued expenses. Given that the 2020 net income has been $690mln Dollars, more than the entire $12.2 bln Dollars of issued stock and more than the entire cash&equivalent $19.3bln Dollars in liquidity, would have to be sold off to raise actual cash and liquidity to meet liabilities and obligations. However, the company floats an outstanding 960mln shares in the stock market, thereof in any case of a liquidity need, would be necessary to raise more capital issuing more common stock, or even debt. But, would it be possible to pay liabilities and remain solvent for all the shareholders?
DILUTED NET INCOME $690MLN DOLLARS
AMAZON P/E RATIO 79.58 COMPARED TO THE INDUSTRY P/E RATIO 201.01 ALSO EXPLAINS HOW INFORMATION TECHNOLOGY INDUSTRY PRICE/EARNING RATIO HAVE BEEN HYPERINFLATED
SHOPIFY P/E RATIO 857.85
ALPHABET P/E RATIO 36.52 WHILE THE INDUSTRY P/E RATIO 42.16 HAS BEEN ALSO INFLATED
APPLE P/E RATIO 37.01 QUITE INFLATED COMPARED TO INDUSTRY P/E RATIO
ZOOOM P/E RATIO 286.17, MOST INTERESTING PRICE TO CASH FLOW 1,052.05