Rrecently a SENS announcement which reminded me of my worst investment came out, and I thought it was worth sharing the story, but also the lessons learnt. The SENS was from Southern Electrical Company* (SEL) announcing a delisting at 32c, not much else to that, as it happens all the time. But this story goes back to 1998, and involves the dot-com bubble and a stock called Brainware.
Brainware was an exciting IT company headed up by Piet dem Boer that was set to take over the world, listing on the JSE in January 1998 at 100c per share. I applied for the initial public offering (IPO) and got myself 20 000 shares at 100c each, and on the first day of trading it closed at above 200c, doubling my money. This sort of listing exuberance was not perfectly common for IT stocks back then, in fact, these sort of IPOs were massively oversubscribed (if I recall I had applied for 50 000 shares knowing I would only get around half or a quarter of that). The stock continued f lying, almost getting to 600c by March of that year. But did I take the profits and sell? No way, this one was going to the moon and I was along for the ride.
But then the wheels started falling off, and by 2000 the stock was trading at 22c and I still had 20 000 of them. At least I resisted the temptation to double down and buy more, but my investment was now off almost 80% from the price I had initially paid.
Fast-forward to April 2002, the share is now at 1c and SEL reverse lists into Brainware and then the real pain, it does a 50-for-1 consolidation (meaning that 50 shares equal 1 and in theory the price increases by a factor of 50). This means that I now have 400 shares (at an effective purchase price of R50 each!).
Over the next decade, the SEL share price does nothing, getting above 100c briefly during the 2007 hype before settling back down to around 30c (remember the consolidation means 30c is effectively 0.6c on my 100c purchase price).
The proposed delisting means that I will receive R128 for my R20 000 investment (not taking into account the 15 years I have waited to exit).
So what are the lessons to be learnt? We will do stupid things in the stockmarket and they will cost us money, but if we are to call them school fees, we need to actually learn something from them.
IGNORE THE HYPE: