Over the last few months we have seen a number of developing issues involving the likes of Facebook and Tesla. What is becoming obvious is that markets are extremely good at digging out accurate information as opposed to working on hearsay and speculation. While there is nothing to suggest that the likes of Facebook Tesla have misled the markets, what we do know is that the cumulative impact of various expert views can bring issues to ahead as we have seen.
Professional traders
Whether you want to call them professional traders or “insiders” there is no doubt that many investors have been aware of issues within Facebook and Tesla for some time. We have seen constant selling into strength, we have seen volatile share prices and while private investors are only able to value companies using official company announcements, there is a lot more going on under the surface.
Tesla Motors
The markets are indicating, despite different suggestions from the Tesla management, the company will need to come back to the market to raise funds in 2018. The short term collapse in the share price has been reversed, for now, amid signs that the company is starting to hit production targets for the vital Tesla Model 3 vehicle. There is real concern over the company’s debt pile and the fact that Tesla bonds were recently downgraded to junk status does not help. This simply makes it more expensive for Tesla to raise funds in the short to medium term until it has a better track record and regular profits.
Elon Musk is a very experienced investor having been there and done it on numerous occasions with great success. Even though he has a space travel company in his portfolio, experts believe that Tesla will be the most challenging of his current investments. He is confident the company will continue to prosper, and let’s not forget he has billions of dollars invested in the company, but time will tell. Some might suggest that the tail is wagging the dog in that markets are dictating opinion on Tesla debt but we shall see.
The issue of privacy and the mining of data from Facebook accounts is not a new problem for the company having been in the background for some time now. Facebook has changed its privacy policy on a regular basis sometimes to the detriment of users. Whether or not Cambridge Analytics over extended its agreement with Facebook there is no doubt that private member information was discussed. The company is now the centre of numerous investigations across the globe, CEO Mark Zuckerberg is under pressure to resign and the company is currently treading water, as opposed to planning for the future.
If the markets had believed the privacy issue was over a few years ago and there was no mining of private member data, when the issue was first raised a few years ago, the situation with Cambridge Analytics would probably never have been disclosed. Whether markets are correct about Facebook’s heavily weighted privacy policy or this is simply a one-off remains to be seen.
Unveiling the truth
One thing is for sure; markets and professional traders have extremely long memories and have an unerring ability to join the dots and extract the trust, in the end.