GameStop fair value dilemma

By how much did GameStop's share price increase between December 2020 and 29 January 2021?

USD306.16

GBP306.16

USD325

USD18.84

For what reason did small investors wage the GameStop campaign?

Because sports betting declined since sporting events were canceled because of Covid-19 so people took to betting on markets instead

Because they wanted to force hedge funds shorting the stock to close out their positions

Because they were frustrated with the effect of the continuing low-interest rate environment

Because they had saved more cash in the lockdown

What is the inherent risk in any open-ended investment fund?

They can issue an unlimited amount of shares

They can easily be closed to new investors

Investors must wait until the end of the day to know whether they have lost money or not

They provide liquidity to investors based on the unrealised gains of investments held by the fund

Which of the following words or phrases used in the definition of fair value does not need re-examining?

Rational

Freely

Exit price

Orderly market

What do investment fund boards need to consider urgently?

Whether any rational investor would be prepared to buy GameStop at USD325 based on the underlying fundamentals of the business

Trades that can help cover their short position in GameStop

Whether they should suspend trading in GameStop for their investors

Their exposure to GameStop

What do investment fund boards need to understand?

Whether they will be able to meet margin calls without folding

Why small investors are trying to punish those with short positions in GameStop

Whether a false market existed in GameStop during January

How Reddit's forum WallStreetBets forum works

Why might funds face a challenge from long-term investors?

Because the fund stands to lose a lot of money if it doesn't take this challenge from small investors seriously

Because they may feel it is inappropriate to use the closing price as a basis for fund liquidity for redemptions

Because they are allowing new investors to subscribe to the fund

Because they haven't been able to prevent an internet fad from warping market fundamentals

What would valuation at last price available for an orderly market typically entail?

Accepting that the fund may lose a lot of money

Accepting the valuation on 29 January

A deep haircut to the valuation of GameStop

Waiting until the market returns to normal

How would a fund work out the last point at which the market was functioning in an orderly way?

Log on to WallStreetBets to find out when the frenzy started, and the price at that point

Analyse trading volumes and price movements

Work out the average price across the previous financial year

Find out the price of GameStop shares in November

Why might using a 'side pocket' be helpful in this instance?

Because it would restructure the fund

It would allow the market time to sort itself out

It would allow the fund time to exit their investments in GameStop

It would ensure liquidity in the main fund without having to deal with valuing GameStop for now

GameStop fair value dilemma

By how much did GameStop's share price increase between December 2020 and 29 January 2021?

For what reason did small investors wage the GameStop campaign?

What is the inherent risk in any open-ended investment fund?

Which of the following words or phrases used in the definition of fair value does not need re-examining?

What do investment fund boards need to consider urgently?

What do investment fund boards need to understand?

Why might funds face a challenge from long-term investors?

What would valuation at last price available for an orderly market typically entail?

How would a fund work out the last point at which the market was functioning in an orderly way?

Why might using a 'side pocket' be helpful in this instance?

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