iEnergizer up 15% on announcement of a matched bargain trading arrangement

iEnergizer (LON: IBPO) should be taken here as a lesson in the value of liquidity in investment markets. Leave aside the company itself - which isn't doing well, that's why it's leaving the quoted market - and ponder instead the lesson that this story has for us.

iEnergizer realized that it just wasn't doing well on the public markets and that there was no particular reason to continue carrying the - considerable - expenses of maintaining a listing. OK, such decisions can indeed be taken. iEnergizer fell 90% on the announcement. Now, we could, if we wanted to be very aggressive in our argumentation, insist that this shows that liquidity in an investment is worth 90% of its value. This would not be correct of course, for that would be to be too aggressive in our argument.

However, we can refine that by noting that today's announcement of a matched bargain facility has raised the share price 15%. That is, the move from no liquidity when iEnergizer leaves the exchange to very limited liquidity is worth 15%. Presumably the difference between full market liquidity and the matched bargain version is also worth something. The net effect of this is to kill off that idea of a Tobin Tax, or the financial transactions tax - also known as the Robin Hood Tax.

iEnergizer share price from London Stock Exchange

Some of that 90% fall is due to the conditions that led to the decision to withdraw from the market. But as the 15% rise also shows then so too some part of that fall is due to the loss of liquidity.

The Tobin Tax, or FTT, is the observation by varied lefties that financial markets just trade too damn much. So, we should impose a tax on each trade so that fewer trades are done. The problem is as above - reduce the liquidity of the markets and we reduce the value of those by now less liquid assets. It's more difficult to buy and or sell so they're worth less. 

We know what happens when investments are worth less - people save less in order to buy them. Or, another way of saying the same thing, less investment happens in the economy. That makes the future poorer for it is investment now which creates wealth later. 

An FTT makes us poorer because it reduces liquidity in markets. As we don't want to be poorer therefore we shouldn't have an FTT. It's really all rather simple - even if there are those who adamantly refuse to listen to, let alone believe, the arguments.