23/11/2004 - 21:00

Tim Treadgold: Briefcase - ’Tis the season to buy merrily

23/11/2004 - 21:00


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Christmas, it seems, is not just a time for rushing around Coles Myer and Harvey Norman looking for that last-minute present. Stockbrokers too have a shelf full of gift ideas, ranging from an offer of shares in an assortment of small mineral explorers, to

Christmas, it seems, is not just a time for rushing around Coles Myer and Harvey Norman looking for that last-minute present. Stockbrokers too have a shelf full of gift ideas, ranging from an offer of shares in an assortment of small mineral explorers, to construction companies and fund management firms.

And, like traditional Christmas gifts, some of the offerings from the brokers will bear an uncanny resemblance to those unwanted socks, handkerchiefs, and flower-patterned shirts that we all get and try to exchange when the shops re-open in early January.

On the shelves of your friendly corner broker today you can currently find 37 varieties of new floats, with more said to be in the backrooms, being prepared for display.

Briefcase hasn’t seen a rolling tally of new floats being offered but he suspects that the 37 available right now is the highest number since the great float flood of this time last year when every man and his dog was rushing to launch a new company – some, it might be argued, finished up floating the dog rather than the company.

Whatever your opinion of the quality of floats and whether you play the float game or not, there is no escaping the cold hand of a statistical review. In other words, how have the new floats of 2004 performed? If nothing else, a review of what’s happened in the first 10 months of the year should serve as an accurate pointer to what is likely to happen with the current crop of floats. It might even help an interested punter decided whether to play the float game or not.

According to a call-of-the-card by Briefcase, investors have taken up (as at November 22) shares in 122 new floats, with a further 11 abandoned on the roadside having failed to attract the funding target. In the genteel world of broking, these are tagged “withdrawn offers”.

Leaving the dead by the kerb (though one side of Briefcase says these really ought to be classified as failed floats) it is worth looking at the 122 survivors and noting that, of these, 69 are now trading above their issue price, 47 have sunk below the issue price and five are stuck at the issue price. Given that to sell the line-ballers would cost brokerage and stamp duty, we’ll call them fizzogs as well.

On a proportionate basis, this produces a calculation which shows that 43.5 per cent of all new floats cost the consumer money, and 56.5 per cent made money. Prize for worst float (so far) goes to Concept Sports, which raised $12 million through an issue of 50 cent shares and is now trading at 7 cents, an 86 per cent fall – and all between the float date of June 15 and today. Slam, bam, all done in five months. Brilliant.

Prize for the best float goes to Allco Hybrid Investment Trust, which raised $131 million in August with a float of $1 shares, and is now trading at $10.30, a gain of 930 per cent in a matter of months. Drool.

Cutting through the gee whiz factor of that 930 per cent rocket and disregarding the 86 per cent five-month wipeout, it is important to look at the overall numbers because they show a disgraceful picture of almost half the floats of 2004 costing initial subscribers money.

Briefcase wonders how it is possible for a company promoter, or the broker supporters, to sleep at night knowing that they have dressed up a float, packaged it, marketed it and sold the equivalent of an Hawaiian shirt that will either (a) disappear into a bottom drawer or (b) become a car cleaning rag.

What makes it even more interesting (some would say distressing) is that the report card for 2003 was about the same; 94 floats with 55 still above water, and 39 drowning, a performance which produces a pass mark of 58.5 per cent – and a 41.5 cent failure rate.

So, where does that leave us with the famous 37 floating at a broker near you right now. Briefcase, in the interests of good manners (and possible legal problems), will not comment on who is likely to cause a haemorrhage in your wallet and who is likely to produce yips of delight.

However, you have been warned. The chances of success in backing a new float are a lot worse than you probably imagine. They are not a licence to print money (except for the promoters).

And, as a final word of caution, be aware than the biggest assortment at the bottom of 2004 float performance register are small explorer/miners.

SPEAKING of new floats, Briefcase wonders whether it’s time for a re-appearance of the once highly-publicised Lesotho Diamond Corporation, a business that was seeking to raise about $75 million from London investors.

Interest in Lesotho lies less in its potential as a diamond producer and more in the man behind the float, the one and only, Alan Bond (drum roll).

Back in April, Bond and his friends at Lesotho, withdrew the float after failing to get city support. There were mutterings about Bond, while not being a director, earning fees as a consultant.

According to the timetable kept by Briefcase, the Lesotho float was sidelined for about six months, which means that right about now is the time for a fresh attempt at getting the stock onto the market, and for Bond to enjoy his long-awaited return as a captain of industry.

And, if Lesotho Diamond is to not be the company that makes Bond a household word again, there should be plenty of potential for something closer to home from next year when a five-year ban on Bond acting as a director is due to expire. Briefcase can hardly wait.

“The English think that incompetence is the same thing as sincerity.” Quentin Crisp.


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