One of my late mother’s pastimes, inherited from her father, was investing in shares – not so much to make money but for to add interest to life. Going to company AGMs was for her – and many others of pension age – a social thing rather than an opportunity to grill the board with incisive questions. In early times some companies – RHM and Young’s Brewery to name but two – followed their AGMs with a really good lunch (the real reason many went!) but these ended when the host’s hospitality was abused – what sort of person goes to an AGM and fills their briefcase with bottles of spirits or food from the buffet? As for me I’ve not followed in her footsteps. My three incursions into the world of shares have been conspicuous failures!
Firstly, in the 1990s, came Pathfinder Repossessions. After the UK’s Conservative government (correctly) removed double tax relief on mortgages but (mistakenly) deferred bringing this change in , there was an almighty housing boom, followed by a rise in interest rates and a crash, with many people having their houses repossessed. At the same time the government introduced the BES (Business Expansion Scheme): all profits made from investing in such companies were tax free.
One such company was Pathfinder Repossessions. The story was a good one. As the New York Times explained (Feb 1992): “Their aim is to snap up homes at auction, quickly refurbish and rent them, and then sell them off in four or five years”. Five years later, with property prices having gone up by around 17% and all the profits from renting there should have been a useful return. But in contravention of the statement in the original prospectus ‘that the Directors will endeavour to facilitate the realisation by Investors of their investment at the end of five years‘ the company’s money, supplemented by significant borrowings, had been invested in a speculative new-build scheme in Wimbledon. I made my opinions clear at the AGM, noting “The Profit and Loss account for 1996-97 show sales of £387,000, which I presume is rental income from properties still owned by the company. By some sleight of hand all but £3,000 of this has been spent on management and administrative expenses”. The chairman responded with some very sarcastic comments.
A few months later Pathfinder Repossessions was taken over by Pathfinder Properties. At least I didn’t lose my money. I invested £2500 and got back £1,882 in cash and shares in Pathfinder Properties worth around £871, net total £2,753, for £2,500 invested in 1992 – a five year period when savings interest rates were around 5-6%. Some people made a lot of money out of Pathfinder, just not the shareholders.
Skip a few years to the excesses of the dotcom boom. All sorts of companies were being set up from scratch and were soon to make millionaires of their founders even though they weren’t making money. The key to this was to get a share floatation, a not inexpensive process. Step forward Durlacher, a long established stockbrokers. The deal was simple – payment in kind: Durlacher would float your company in exchange for a small proportion of the share capital. The attraction for people like me was that by investing in Durlacher you were buying into a parcel of dotcom companies, knowing that the due diligence had been done by supposedly very clever people. So I put some money into Durlacher shares. They went up. Repeat two or three times.
And then …. Reality caught up. As the Telegraph reported: “Durlacher, a star in the dotcom boom when it was valued at £2.3 billion and was on the brink of joining the FTSE 100 index, is now worth less than £5m after seeing its shares plummet from a peak of 441p nearly three years ago. Yesterday, the shares fell a further 0.11p to a new low of 0.82p after it said a review by KPMG had revealed its net assets are now less than half its called-up share capital”. Of course I should have set a stop loss and bailed at an early stage but didn’t. I’m not sure now how much I’d invested – probably a few thousand pounds – but the final insult was that my holding was now worth less than Charles Schwab’s minimum £15 deal. Fortunately one of their staff took pity on me and let me get my last few pounds out.
And so to Australia. Through a friend I heard about a small company called Ironclad Mining. Another great story: they had the rights to mine iron ore at Wilcherry Hill, South Australia. The pitch: “The project has forecast high rates of return from development due to the quality of the product likely to be produced from Wilcherry…. Stage 1 will aim to produce a high quality, low contaminant Direct Shipping Ore (DSO) 62% Fe product which, can be produced by simple low cost, dry methods such as crushing, screening and dry magnetic separation. It is expected that Stage 1(a), which is being fast-tracked into production by the end of this year, is likely to deliver up to two million tonnes a year of DSO ore for at least three years”. Millions of dollars later lots of exploratory drilling had been done, a never-used miners compound built and a shipping barge procured. But with a fall in iron ore prices the shareholders weren’t up for any more rights issues. The company was folded into Tyranna Resources. ASX:TYX, price: 0.007 AUD, Market Cap: $8.98 m (as at 18.09.21). As for myself, I turned $7272 into $306!
TL;DR: Never take investment advice from me!