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View Full Version : How can we know who to listen to? The problem with internet commentators.



BrotherAlpharius
01-20-2014, 07:15 AM
Hi Everyone

BOLS contributors have been making big news this week out of GW's financial report. Personally I think that the problem is being over dramatised. It's bad news but I wouldn't go so far as to agree with Nykona Sharrowkin's declaration, "Well, the big news is Games Workshop's spectacularly BAD financials." http://www.belloflostsouls.net/2014/01/40k-week-in-review-1-19-2014.html

My real point though isn't who is right or who is wrong, it's about how readers can judge whose articles to take seriously. Who is this Nykona Sharrowkin? Clicking on his link I can see that he is male and it looks like he's from the US. He is someone in whom "one of the top GW managers in the country" is willing to confide. Personally I agree with all his points (http://www.belloflostsouls.net/2014/01/games-workshop-to-precipice-and-beyond.html)- GW is pricing itself out of the market, the Board does seem to be out of touch and stuck in the past and there does seem to be a risk of them getting stuck in a vicious cycle of price increases to try to combat a drop in sales volumes.

What you the readers need to ask yourself is whether you should listen to us. The above are my opinions. The only thing I know for certain is that I haven't done enough research or examined the information in sufficient detail to be able to offer anything more than speculation and personal opinion. There are statements in the article that make me question Nykona Sharrowkin's view.

"Those are huge numbers - especally for a public company beholden to the shareholders." A private company is beholden to shareholders, it just doesn't need to be as transparent about it's situation because the body of shareholders is usually smaller and more directly involved.

"And worse for GW shareholders, the whole idea of selling the company at peak value is now seriously in danger. GW proudly touts that they don't do discounting - unless of course you're looking to pick up an English toy soldier company at a 25% markdown. Because if you have deep enough pockets you just got a great deal this week." I may have missed a news story but what's the basis for saying that the shareholders want to cash in rather than maintain a long term investment? The 25% markdown remark is just not how corporate acquisitions work. You don't just go, "Ooh, the shares have hit £x and there are y of them so if x * y = z and I have £z I can buy them up". The buyer has to spend months on due diligence determining an appropriate offering price and rumour of a takeover tends to drive up the price. The principle of supply and demand that determines share prices means that an effort to accumulate shares on a significant scale drives the price upwards.

Maybe it's just because I'm from the UK and Nykona is probably from the US. If I looked at the US market I'd probably project UK based assumptions onto it and perhaps Nykona is doing the same here in the case of the UK market. I'm not looking to insult Nykona, I'd just like a bit of context.

If I were to write an article on GW's financials (which I'm not going to, I don't think I have the necessary familiarity) I would want to preserve my anonymity to keep my personal and professional life separate but I would give something for my readers to help them judge my perspective and bias. Specifically:

Brother Alpharius is a UK based manager of global executive share plans. He is professionally qualified in this field and has almost a decade of experience working primarily with FTSE100 and FTSE250 companies but also some experience of FTSE Small Cap, NYSE and unlisted firms. He has some experience of Mergers and Acquisitions work though this is not his speciality.

Perhaps in future BOLS could include a similar tagline for their article writers.

Wolfshade
01-20-2014, 07:44 AM
Yes, I agree with this.

It is the age old problem of the internet, anyone can purport to be anyone. If we look at teh CHS/GW court proceedings for instance, there was a huge claim that the "internet lawyers" said GW would have their arse handed to them, similiarly there were those who said CHS would have their arse handed to them. Even now the debates of who won/lost is still being debated...

It is of concern that there is scaremongering that occurs when we get such headlines. The trouble is that there is a disjoint between what a shareholder thinks a company is worth and what a company is worth. I think that the blog paints an overly bad picture, but then I may be biased as a GW-sympathiser. It is true that some independent advisors have moved from "buy" to "hold", if GW were in free fall, then it would be "sell" plus the volume of shares traded still remains relatively low in proportions of total ownership.

Indeed the sharprice seems to be holding at this new lower rate.

BrotherAlpharius
01-20-2014, 08:06 AM
Good point about the legal debate. Some years back I attended some professional seminars on IP law in relation to software issues that we encountered and it's just too complex and technical an area for the armchair follower to be certain.

Mr Mystery
01-20-2014, 08:10 AM
It also assumes the drop in takings is based on purely internal causes.

Let us not forget the two big players in the console market very recently went head to head with their latest offerings. And cheap they are not. As there is significant crossover between GW players and Console gamers, this has likely had an impact, especially around Chrimbo. Do I ask my (non-existent) missus for a PS4, or some GW bits? Do I treat myself to the spangly new clever clever XBone, or round off that army at long last?

Then we have the continued strengthening of the global economy. Whilst still pretty rubbish, things are improving. Increased confidence in job stability means people may be going for the more expensive treats they'd previously been putting off due to 'what ifs?'. That nice holiday abroad doesn't come cheap. But it has been ages since you went away.

Everyone has a limited disposable income. Mine goes on beer, GW, pooter games and lots of Blurays (I've bought 15 alone this month).

Without any figures to take these possibilities into account, there's no way the financial results can be accurately analysed.

Could be a duff years, could be a sign of an eventual decline. There's simply no way to tell right now.

daboarder
01-20-2014, 05:42 PM
the ideal solution, trust those willing to put their time and reputation where their mouth is. Go with the source that is willing to provide external references for the claims they make. More of the articles and posters around here need to be willing to do that.