The FTSE Aim All-Share index is a few points away from its 2010 low (excluding the quick Covid drop). Liquidity continues to be dire and private equity continues to take out companies where the public market has undervalued them. Sopheon (SPE) is the latest to receive an offer, this time of 1,000p (a 104 per cent premium to the closing price of 490p).
It’s a difficult market for traders. The long and grinding bear market leaves fewer opportunities. When the market is in a roaring bull run, stocks are running up, private investors are happy to deploy more capital, and hot money is sloshing around, allowing for tighter spreads and good liquidity. There’s also a tailwind of cash inflows.
When the market is in euphoria, opportunities to short trash become abundant – stocks reaching dizzying valuations provide downside protection on shorts. For example, if you’re shorting a stock on 50 times earnings, then for that stock to double it would need to trade at 100 times earnings (earnings being constant of course).