Member Info for Koolhead

If the pattern holds then there will likely be a downturn to just below the previous low, so around 1.65-1.75, at some point over the next few weeks or months. That's the bear trap when you have to avoid the temptation to cave in and sell, as from there onwards there will likely be a big mark up. Right now is the accumulation phase where you have to load up on the cheap!

My autocorrect changed Wyckoff to Wycliffe - apologies!

For those interested in technical trading strategies, it's worth noting that AWE is following the exact pattern of Wycliffe accumulation. We're on the secondary test of the low, so should spring higher from here. https://phemex.com/academy/wyckoff-accumulation

That may turn out to be the best approach, but as you say its very risky shorting stocks, as potential losses are unlimited. If i were new to investing in AWE I'd open a smallish long position now and add either on unjustified further weakness or on positive news before a full rebound. Shorting at 1.80 seems massively risky, as I think the reasonable short term downside scenario is -50p and reasonable upside +200p

Yes, lots of tech start ups fail but not hugely profitable ones with amazing IP growing very fast. But Barcap isnt betting on it failing in an ordinary manner but by turning out to be a scam. That seems a much riskier bet than mine, which is in part that it is a normal company, not a scam. Plus, whether you make a bit of money in the short term isnt the hallmark of sound investing. Picking long term winners is and we'll see about whether AWE is one of them.

So Barcap, your shorting strategy is based on the assumption that AWE announced hundreds of millions of future bookings knowing full well that they wouldn't materialize and that it would have to let the market know eventually. Do you know how crazy that sounds?

It's worth bearing in mind, though, that a huge amount of bad news is priced in already. The market seems to be expecting a bombshell, so eventually, if nothing turns up and results go as planned, the s/p should steadily rise back up to 3.50-4.

I think Carmignac would have been happy to close out at this level, as they're up 50% and presumably have unleashed their weapon already (FT article). But then Tiger came on-board at around 2.55, and Tiger will likely want to make 50%, so I expect they're now all aiming for a drop to around 1.25. I presume Barcap (or his Tea Lady) is reasoning something like this. Personally, though, I dont see shorts opening more positions sub £2 and I don't say the s/p falling to £1.25 unless there is some bad news (fake or otherwise). But with so much shorting it's not obvious the s/p will rise much above £2. So it's a stalemate for now.

It would be interesting if it did fall to 1.20 or thereabouts. Barcap, the real shorters, plus the world and his wife would be buying. S/p would go mental and Im not sure the shorts would be able to close out the bulk of their position anywhere near the trough. The most likely scenario would be another attempt to use the media to manipulate sentiment long enough to close out while flaky investors are worrying about nothing. Personally, I'd quite like a fall to 1.20 as I only hold about 60% the number of shares I'd like to. Still a strong buy at 1.80 though.

For Barcap's 1.20 valuation to make sense, you would have to assume: a) the initital valuation of around £4 or even £3.50 prior to the FT article assumed that around two thirds of the company's value lay in the China partnerships; b) these partnerships are worth nothing at all. Both of these assumptions are surely false. Personally, I based my investment much less on the bookings related to China, which I see as a bonus, and more on all the deals with the rest of the world. I don't think 1.20 is a serious attempt at valuation. Its Barcap's guess at what he thinks the real shorters will look to close out at.

Here's a question for you, L2analyst. Why would a newly floated and well financed company forging deep partnerships with all the leading global tech players, Samsung, TSMC, Google, Amazon (or whichever hyperscalers it is) and currently achieving exponential growth, simultaneously also be setting up some scam in China that would put its very existence in jeopardy? The obvious answer is that it would be completely irrational to do that. So whatever questions you have about China, and I also have some about the investment in the CPP, I think we can discount the conspiracies theories and, more generally, the whole idea that the future CPP revenue is just some accountancy trick to inflate revenues AWE is ultimately just paying to itself.

ARM was my first ever investment, strongly tipped by an academic friend of my Dad's working in computing research. At the time, I fancied myself as a trader and got out far too early. Not making the same mistake with AWE. Ill retire rich on this one!

As an example of how this is a stunning bargain now, compare Alphawave (AWE) to Alpha FX (AFX) - a somewhat better performer in my portfolio(!). AWE has a market cap of 1.23 billion but also around just under 400 million in cash, which means the business itself is valued at around £850 million. Now that's the market cap of AFX. They also have similar financials. AFX has FY 2020 revenue of £46 million and profit before tax of £17 million, going up to around £68 million and £30 million for FY 2021. That's comparable to AWE's FY 2021 revenue of around $75 million and PBT of, say, $30 million. But AWE's forecast growth rate beyond that of around 100% per year wipes AFX in the dust. If AWE achieves even half its forecast growth rate in the 3 or so years to come, the s/p will explode. I honestly think I may be getting a better bargain here than when I bought ARM for 50p in 2003!

The only thing I'd like more info on is the 170 milliom investment in the CPP. They talk about it in the prospectus but given the sum involved (over twice annual revenue for FY 21), it would help to know what exactly the money is being spent on, expected returns, etc. As it is, we only hear about future revenue to AWE but not about returns on the 170m investment. But I'm willing to give them the benefit of the doubt, especially given how well the company is doing in the US, South Korea, etc.

As for the fact that director of AWE is the brother in law of a director of a client. A) so what? B) AWE say they have made all appropriate disclosues C) Doing business in China is based much more on contacts and relationships, so hardly surprising. How can that make the s/p halve?

Also, on the subject of wise road, they look a serious outfit to me. For example, they recently tried to be US semiconductor company for 1.4 billion but were blocked by the US government. Next to that investing 230 million in a joint venture with AWE is relatively small fry.

I've been doing some more researching and thinking into AWE and tbh I'm quite surprised how badly people have fallen for this short attack. There are basically two shorting strategies. One is to attack a company facing serious issues (debt burden, collapsing market share, etc.). The other is to try to make a quick buck by instilling fear, uncertainty and doubt into the minds of investors. This second strategy always depends on manipulating the media. It's not hard to see that that is what is going on here. The FT article, as Amati pointed out, was obviously planted by shorters and does not in any way affect the investment case. But despite not containing any important news affecting the company's financial fundamentals it caused loads of people to panic sell and the sp to halve! Now we have former bulls like l2analyst selling out at a loss because another company's website wasn't that great (it's PRIVATE equity so doesn't need a good website!) and Barcap trying to scare more people into selling on the grounds of alleged insider info from a tea lady at barclay's capital. Its ridiculous!

The short sellers have exploited the rather opaque nature of the companies dealings in China to create a climate of fear around this stock, at least in the short term. But if you look through that I see no reason to believe the company is making up fictitious revenue streams, etc. Ultimately what I look at are: the field a company is operating in, its growth record, and it's future prospects. On all these counts AWE ranks as No.1 of the 40 or so companies I'm invested in. Sure, the SP might fall further but whether it's at 1.80, 2.20, or 2.60 this is an amazing buying opportunity provided you can hold you're nerve.

Can't say I appreciate people shorting companies, going on about how 'toxic' they are, and then saying that they're just trying to protect people. No one here needs protecting, though some genuine investors in the company are always appreciated.