----- Original Message -----
Sent: Friday, December 15, 2000 12:04
AM
Subject: Re: [sharechat] LEARNING TO
INVEST
Please refer to my entry of Dec. 13.
"So, you have
completed the first assignment: "Start losing some money
first"? How did you do it? Did you
invest in one of those little IT companies? I heard that plenty of
options were allocated to the directors!"
"It started with a prospectus with glorious
photos; also, plenty of names dropping. The organizing broker told us
that shares were going to be scarce. No, I did'nt look at the
management contract in small letters nor did I notice some onerous items,
eg. the MD was entitled to 5% of the turnover!
Even if it were say 5% of the net profit, I would
not have liked it. Anyway, I trusted the outside directors.
These directors were selected by
the founding directors and their fees were somewhat
high, I thought".
"What happened
next?"
"They started well and announced a
large contract of $2 mill. There was a big write-up in the paper which said that the company
was a leading player! I enjoyed that phrase! The shares shot
up!".
"And what did their first
Annual report say?"
"I looked at the share dealings and found that a
lot of shares were sold by some directors after that announcement
was made.
I just came back from the Annual meeting; it
seems that contract resulted in a marginal profit which did not
cover the overheads. They now have to sack staff. However, they did say that
they were close to signing another contract".
"Hey, the driver of that
new Bentley, is he the MD of the company?"
"He is! He has done very well but I had to
sell my stock and lost half of my original investment. I don't feel too
well and want to see my doctor for an ECG".
"The second assignment was:
"To lose more money". Congratulations, you have completed both assignments at the same
time! You beat me, it took me two lots of shares to achieve that
result!" Go and see the doc!
Gerry
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