King Digital uses creative metrics like MGABPPU to justify its whopping valuation. But there’s no way to calculate what an enterprise is worth when its profit can skyrocket 70-fold one year and could collapse the next. Rival Zynga’s IPO flub serves as an apposite warning.
The latest plan to wind down the U.S. mortgage giant tanked its volatile stock. Some hedge funds still want to revitalize the business. Trouble is, even kind assumptions suggest Fannie isn’t worth enough for shareholders to get anything back – unless Uncle Sam is crazy generous.
The intervention in Ukraine is bad for Russia’s own economy and will do further harm to emerging economies as they struggle with reduced capital inflows and weak exports. Investors are shifting to developed markets, increasing the risks there.
Ratcheting up his Herbalife campaign, the uppity investor says the company broke Beijing’s pyramid scheme rules. Twitchy authorities may agree, but the country accounts for only a small portion of revenue. It’s hard to see just how China could help push Herbalife’s stock to zero.
Motown’s plan for restructuring $18 bln of debt envisions paying equity holders – i.e. ordinary Detroiters – at the expense of secured creditors. This shareholder-friendly approach might save the city, and make Judge Rhodes a hometown hero. But markets may yet exact a price.
Probes into possible currency market manipulation will speed up industry change. The shift to electronic trading will be accelerated, squeezing banks’ trading profits. And with traders cagier about sharing juicy titbits on flows, exchange rates may start to move differently.
Debt levels have grown, but not nearly as much as chains of interconnected borrowers and lenders. Poor capital allocation has encouraged companies and individuals to step in where banks don’t. Longer chains could magnify the effects of a default and turn confidence to chaos.