Sometimes it will be the obvious ones like BHP, Commonwealth Bank or Woolworths and others it will be about a dicey oil or gold prospect currently trading at three cents.
In all these cases I have nothing to offer because I’ve long believed directly investing in shares exposed investors to excessive volatility.
As proof, you only have to ask the long suffering shareholders of Pilbara Iron Ore explorer, Brockman Resources about the emotional and financial roller-coaster they’ve suffered over the past few years.
Brockman has been the subject of a seemingly endless takeover, by (wait for it) a Hong Kong limousine company, Wah Nam International.
The story is so convoluted that I couldn’t describe all the theatrics if I dedicated my next ten columns to it, but here’s a quick rundown.
In March 2007, Brockman announced a huge resource at its Marillana project and raced above $3 a share.
Then the GFC hit and it fell to around 40 cents.
Wah Nam, through capital raisings in Hong Kong managed to buy a stake in Brockman, a company with nearly 1.9 billion tonnes of iron ore, just after the GFC when its price was still extremely low.
It acquired more shares until getting a 20% stake where it launched a takeover for Brockman; here it offered its own shares as compensation to Brockman shareholders at an implied price of $6.47.
The response was negative from Brockman and its shareholders, who soon alleged offshore associates of Wah Nam had been warehousing Brockman shares.
Nearly another 20% of Brockman was found to be held by Asian investors who all accepted the takeover – something waved through by Australian regulators!
Soon enough though, Wah Nam had over 50% of Brockman, but couldn’t get any higher.
This was until they launched another takeover late last year (currently worth around $2.50) now supported by the Brockman board who held 11% of the company!
It’s been an epic rollercoaster for shareholders, up, down and up, then down and halfway back down again.
Unfortunately, for Brockman shareholders, it was once considered a potentially $20 share.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we’re arguably the best financial advisor in Australia.
