After the Securities and Exchange Board of India (SEBI) issued an interim order on Brightcom Group, citing concerns about the firm’s preferential offer, Shankar Sharma and 21 other shareholders of the digital marketing company were barred from selling their shares. Despite the fact that the firm has been telling Indian stock market bourses about the developments after the SEBI ruling, ace investor Shankar Sharma has stepped out ahead of the board meeting set for August 27th, 2023 and discussed investing wisdom while partaking in 4 AM investment.
Shankar Sharma stated in a lengthy tweet that he has already completed and collated capital market regulator data requirements, submitting all investor remittances to the firm. Market mogul explained the advantages and drawbacks of 4 a.m. investment, saying that the downsides are recognised and factored in, but the upsides aren’t. He stated that recognised issues can be modelled, but unforeseen ones are impossible to defend against.
Please see Shankar Sharma’s tweet below.
Post Link: https://twitter.com/1shankarsharma/status/1695302162492883322?s=20
Shankar Sharma explained the financial knowledge when investing in stocks on Twitter, saying, “When it comes to 4 AM plays, of which I have done many, making a lot and losing a fair bit.” And, in particular, my investment thesis for BCG, so that it may serve as an excellent (horror) case study in 4 AM investing. Suresh Reddy is someone I’ve known since roughly 2014-15. He would meet with me on occasion to discuss his business chances. I was never interested because a) it had a lot of debt and b) I perceived the balance sheet as bloated.”
“Then there was COVID. As digital expenditure increased due to the epidemic, all Ad Tech businesses globally benefited. BCG’s numbers were also rising, as were those of other similar firms in India and the United States (Trade Desk, for example). That’s when, in or around September 2021, I thought the time had come: the balance sheet had been reorganised, an impairment charge had been made, ROE was increasing, debt had been eliminated, and company was rising rapidly. “I spoke with overseas executives and discovered that EY was auditing a significant portion of their overseas profit,” Sharma continued.
The risk associated with a 4 a.m. investment
The ace investor went on to say, “I was sure there were, otherwise the market wouldn’t be trading it at book value for a debt-free company earning 15% ROE.” That, though, is the core of 4 a.m. investing. Because of the historical baggage, such stocks are inexpensive. The bet in 4 a.m. investment is that the downsides are known and factored in, but the upsides are not. “Known problems” is the key phrase here. We can use models to solve recognised difficulties. It is difficult to defend against unknown/undisclosed hazards.”
Shankar Sharma commented on the recent SEBI interim ruling, saying, “The latest interim order lays bare things that would shame a porn star.” It also demonstrates the irrationality of some management decisions. That is, if an employee needs to purchase stock in your firm, you may provide a loan/arrange an NBFC loan, as many companies do. Why go through illegitimate hoops to make a purchase? Apart from psychotic misconduct, there are several more examples of plain incompetence at work. As an investor, reading the interim order is like eating a sandwich with one part shock, one part horror, and one layer of raw rage in the centre.”
