Go or No-Go Decision – How to Structure the Framework for the Investment Case Games Workshop

Abstract

In this article, I will analyse as a buy-side advisor whether Games Workshop would be a good investment, given the massive increase in Games Workshop’s share price today. Three arguments that have been made for spending time analysing the annual financial statements to decide whether an investor should invest in a company are based on the role of financial reporting in the functioning of capital markets. Capital markets are characterised by (1) information asymmetry, (2) conflicting interests, and (3) expertise asymmetry. (1) Information asymmetry between investors and companies occurs because usually companies have an information advantage over investors regarding the investment opportunity’s value. (2) Both parties can have conflicting interests and credibility problems because the companies’ communication may not be credible due to their incentive to inflate their business ideas’ value. Finally, (3) there is an expertise asymmetry in between the players because in general investors are not sufficiently financial knowledgeable to analyse the value and successfully decide on an investment opportunity.

Keywords: financial reporting, financial analysis, investment, investment case, gaming, buy-side advisory, financial statement

JEL Classification: G00, G11, G24, G1, G32, G34