RC365 Holding (LON: RCGH) shares are down 20% today. RCGH shares have roared ahead recently on what we consider to be the most spurious of grounds. We think this is simply the AMTD and Top Financial nonsense spilling over from the American markets. Something vaguely Hong Kong, vaguely financial, catches the eye and the shares get chased ever higher. Until, of course, it becomes obvious that there's no real substantive value there and the price comes tumbling down again.
We've been warning about RC365: “RC365 Holdings (LON: RCGH) shares are up 200% (at times) this morning in London. We've absolutely no news at all explaining why this might be so. At least at our pixel time there's no corporate news release, nothing to the exchange. Also nothing on the wires or in press releases. It's therefore necessary to speculate on why this might be, what could be happening. Our assumption - the absence of any other information - is that we're getting a slight Americanisation of the London market here.”
As it turned out a few days later we got more news on RCGH: “RC365 Holding (LON: RCGH) is, according to the London Stock Market, now worth £100 million. That's up from perhaps £20 million a week back.This is one of those valuations that we simply do not believe. Of course, the valuation is correct, there's no arguing with prices. But we'd suggest that this is an excess of speculative fervour rather than an objective view of reality.”
RC365 Holding share price from London Stock Exchange
We then got a full explanation of that earlier rise from RC365: “So, Hatcher Group hires RC365 for £1.5 million to write an app. This increases the price of RC365. Hatcher Group then sells shares for a £4 million or so profit above the price they would have got before the announcement about the app contract. RC365 shares begin to decline significantly once the share sale is announced to the market. Well, yes, OK. Clever. Works, is wholly and entirely legal. Wish we'd thought of it ourselves in fact, even if we did still manage to spot that there was something that wasn't going to make us shareholders out here rich about it all.”
And now this latest story to boost RCGH shares: “Now think on this for a moment. At that 60 pence - before this latest announcement - RCHG had a market capitalisation of some £60 million, give or take. After the announcement it's at £120 million (actually, £118 million). So, the additional value from this announcement is £60 million. That's applying a valuation of £20,000 to each credit card issued. That's absurd.” That valuation then increased to £30,000 in added market capitalisation to RC365 Holding for each of those 3,000 credit cards that might be issued. This is not a sensible valuation.
We still run with the idea that there's no great substantive value to RCGH. The stock market might speculate in it but this simply isn't something with an objective value anywhere close to the current price.
