“Hi Eoin/ David, I am currently considering investment opportunity in a start up tech stock. I'm aware of tech bubble talk and also extreme tech valuations these companies can achieve in today's market so I would categorise this as high risk/ potentially high reward investment. They are in white labelling talks so I assume this is a point where valuations can potentially soar? Any opinion/ advice would be much appreciated. FYI the stock is Vopium.”

David Fuller's view

Thanks for a very interesting email.  I think you made a good opening assessment and you are obviously aware of the high risk versus potentially high reward of such investments.  We have seen a tech bubble, in my opinion, although obviously nothing like the 2000 blow-out.   

I think this smaller tech bubble has already burst, although this will require further confirmation.  If so, that will help you in the exceptionally important area of purchase costs.  However, the flip side is that new issue mania may have been removed for a lengthy period.

Vopium (provocative name!), is covered on the internet and “provides mobile applications for making international phone calls on your mobile phone”, according to Bloomberg’s description page.  Vopium is currently listed on the French exchange and this weekly chart shows its explosive action commencing last October before quickly peaking in January as the tech bubble initially deflated.  

Provided you can buy Vopium at a reasonably sensible price in London, and I think you probably will be able to do so now, your risk is reduced but you may have to be patient in terms of price appreciation, especially if there is another shakeout in the new tech sector over the next few months.  That medium-term risk is quite high in my opinion.  Additionally, the ‘Voice over IP provider’ field is quite competitive, but this review of Vopium is favourable.