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One company, three prices: TSMC mispricing echoes the 2000s dotcom bubble

Chipmaker is cheaper, or more expensive, depending on where you are buying

A TSMC chip factory in Hsinchu, Taiwan: the chipmaker is effectively trading at three different prices. Photograph: Lam Yik Fei/The New York Times
A TSMC chip factory in Hsinchu, Taiwan: the chipmaker is effectively trading at three different prices. Photograph: Lam Yik Fei/The New York Times
Proinsias O'Mahony's picture
Proinsias O'Mahony
Tue Nov 12 2024 - 06:00

Tech bubble talk usually focuses on the world’s most valuable company, AI giant Nvidia. Yet a lesser-known tech stock trillionaire – Taiwanese chipmaker TSMC – may be a better example of investor craziness.

Researcher and Acadian Asset Management portfolio manager Dr Owen Lamont notes that TSMC shares, which have doubled over the last year, cost 20 per cent more in the US than in Taiwan. One company, notes Lamont, but two different prices.

Such mispricings can happen. Indeed, it has long been the case with Ryanair, as the airline’s American Depository Receipts (ADRs) trade at a premium to shares in Ireland.

However, Lamont says you don’t expect to see a 20 per cent mispricing in a company like TSMC, which is valued at over $1 trillion and is the 10th most valuable company in the world. Its premium has gone from zero to 20 per cent in the last two years, a mispricing he describes as “stupid, chaotic, and embarrassing”.

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Additionally, TSMC accounts for a quarter of the Taiwan Fund, a closed-end fund which trades in the US. However, this fund doesn’t trade at a premium – it trades at an 18 per cent discount, suggesting that “AI-crazed American investors are unaware that the world’s most important chipmaker is hidden away in a boring old closed-end fund”.

When you put TSMC “into an ADR wrapper and sell it in America, it’s worth more than in Taiwan”, says Lamont. “When you put it into a closed-end fund wrapper and sell it in America, it’s worth less than in Taiwan. One company, three prices.”

Such mispricings were common during the dotcom era, adds Lamont, who documented various such examples in a 2002 paper with behavioural finance expert and Nobel economist Richard Thaler. “When you find yourself recycling text that you wrote about the tech stock bubble of 2000,″ he adds, “you have to wonder if the market is approaching bubble territory.”

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