Something Fishy
Imagine you're a new investor. The market's cooking. You want in on the action. You look through the tape to find ideas. The price of sardines is going vertical. You buy some. The price goes up. You feel great. You buy some more. The price goes up some more. This goes on. Finally, you decide to cash in. No buyers.
Turns out the only reason the price of sardines kept going up was that you kept buying them. You were the whole market. All your paper profits vanish. You eat your feelings on the salty remains of your trading adventure.
Seth Klarman tells this fable in his book, Margin of Safety. The point is: sure, you can buy things that don't have much, or any value and their price may go up, but that’s not a reliable investment program. It'll collapse eventually. Better to buy things that do have some underlying value and buy those for less than they're worth.
IRL, shares exist on a spectrum. At one price, a share in a company gets its value from the ownership of that business. At a much higher price, it's just a sardine. There's no point where your share turns into a fish and you know you've crossed over. Except crypto, where being a sardine is the whole point (I jest).
So what?
In December, Lamplighter wrote about Kalray, a French chip designer — rather, it’s more like the idea of a French chip designer. The company was exiting a restructuring saga. It shed the majority of its operations. It set a new course with just one customer.
Since then: share price launched from €0.80 to €3.65 on January 23rd. That’s great!
It dropped 27% on January 26th — more than the market cap of the company back in November. Why'd it go up? Why'd it drop? Is it just a trading sardine?
Swimming upstream
Most company financial releases land without a splash. They contain words but no information. The message is there's nothing new to say.
This is fine. Most businesses aren't made or broken in a moment. Telling investors "nothing's changed" is what management should be doing most of the time.
At the other end of the spectrum, Kalray dropped this banger. The highlights:
"We increased 4x in 2025!"
"We're making profit!"
On the one hand: cool. Lamplighter looks really smart for publishing on Kalray last year. Shares are up. On the other hand: November shares barely traded. Average daily trading volume then was about $72 thousand per day. A tin of sardines cost more than a share. It wasn't the kind of thing where you could put a lot of money to work and not move the price. You’d quickly turn it into a sardine.
Deeper water
Since the announcement, Kalray has gone from untradable to whatever is just next to untradable. Its share price is more expensive. €2.62 today compared to €0.80 when Lamplighter first published. It's also on sounder financial footing and there are many, many more shares changing hands. The value of shares traded in a day is up €2.7 million, 40 times more. The upshot is a slightly more investable and deeper opportunity.
Fish in the sea
The company is still not worth much. Its market cap is under €50 million. It’s the kind of thing that attracts folks looking to recover from bad sardine trades. That’ll likely bring price volatility. Share price will dart around like fish.
The opportunity for the business is still close to binary. If the company's product gets traction, the AI chip opportunity is bigger than €50 million. Much bigger. But, that's still an “if,” It would need to drop many more press releases between now and success.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.