I remember when I left my office at 360 Collins Street Melbourne to walk across to the ASX in 1988 a car backfired. My friend and fellow colleague with whom I invested smiled anxiously,
“Was that a shot?” He asked expectantly.
We were chasing penny dreadful stocks at the time, such as Meridian Resources, an oil stock with huge deposits and little or no revenue. A stock heavily influenced by conflict and the impact oil prices had on its share price at the time. I quickly learned that stock price volatility often hinged not on what actually did happen, but on what people thought might happen. That said the subsequent failure at the time of Meridian Resources did not quash our appetite for penny dreadfuls, as they were known. We soon acquired a holding in the then Consolidated Exploration (Cons Ex), a gold stock in Victoria associated with a then client of mine, Hugh Morgan of Western Mining Co. Cons Ex had large tracts of gold deposits to explore and the potential to assume the mantra as one of Australia’s leading gold stocks. Unfortunately it too, failed to fire when we held it.
You would no doubt understand my trepidation over three decades later when assessing Imugene (IMU), a stock trading in the low single digits. Though having since been a fund advisor, part owner of a master trust, and financial adviser to thousands of clients, I had learnt that market market scepticism, at times market paranoia, or even a distrust of small priced stocks, brought with it the potential for enormous gains. And if you could ride through the dark merky waters of fear, you may just reach your investment goal. Needless to say I too had realised journalists didn’t always see it that way. Journalists didn’t like the good luck stories, it didn’t sell newspapers.
At the time they were underwhelmed by stocks on the newly formed Nasdaq Index in the US.
"How could these internet stocks, Yahoo, Google and Amazon ever really be worth as much as people say they shall be?" The journalists mused.
They have little or no revenue and yet are trading at P/E’s much higher than their readers favourites of the day, Caterpillar, American Express and Coca Cola. Back then valuations of Apple, Cisco Systems and other tech stocks were constantly queried by journalists, who failed to realise the potential of the internet revolution. If you would have told them at the time that many of these IT stocks would one day surpass the valuations of the then Dow Jones Top 30, you’d have been laughed out of the Gentleman's Club and shunted off to a nearby psychiatrist for counselling.
That said in late 90’s growth stocks were all the rage. I remember at the time presenting at a function held at Macquarie Bank a speech on the benefits of margin lending and gearing into growth stocks to obtain leverage. On the same ticket were Kerr Nelson of Platinum Funds Management, (and from memory, Spencer Young of Hedge Funds Australia). At the time their hedge funds were definitely not the flavour of the month they were to become. George Soros was not well recognised at the time here in Australia, and with him the advantages of hedging against market down turns. We had not yet experienced the September 11 stock market Crash, and many investors were too young, or had long forgotten the Stock Market Crash of 1987. Master funds and with them the need, or even ability to diversify with multiple fund managers across multiple market sectors, was a relatively new concept. It wasn’t until planes crashed into the two buildings that comprised the World Trade Centre in the US, and the lives of millions of investors came crashing down with them, that this generation began to truly comprehend market volatility, and with it the need for long term investing. The need to exercise resolve, patience and restraint. The need to stay the course in the face of adversity, not to panic and sell out. The need to undertand that although the clouds surrounding your investment may appear black and stormy, one day the clouds shall dissipate. That some day the sun shall appear once more, and with it the valuations and stock prices of the past shall not only be reached, but indeed surpassed, if not doubled.
Unfortunately, as myself and my advisers quickly ascertained, many if not most of our Mum and Dad investors could not handle the pain or shock of September 11. They cashed in their growth investments at practically half of their previous values, and moved into the safer havens of cash, fixed interest, and at times residential real estate, never to return. Years later as stock market valuations continued to double, if not treble or even quadruple, they must have looked back and pondered what might have been.
The same may well be said of many Imugene (IMU) investors on what for us could aptly be described as Black Thursday, May 27, 2021 when having reached 49.5 cents but days before, the stock lost over a third of its value, to trade at 33 cents. I sat watching in dismay as $1,000, $2,000 and $5,000 trades went through at 34 then 33 cents. The same Mums and Dads who I had met with years earlier were throwing away their once in a lifetime opportunity to obtain a small fortune. To amass huge wealth from what is one of the greatest stories in modern times, a stock with long term licenses and patents in the largest selling drug market in the world, the treatment of cancer. A stock that has consistenly delivered, with new and innovative treatment products and their subsequent outstanding trial results. A stock that has brought together some of the worlds leading innovators in the fields of immunotherapy and cancer research. A fact exemplified by the publishing of their work in the worlds leading cancer journals, including but not limited to publication in the American Association for Cancer Research (AACR).
I was shocked. What could have led to such carnage? Such an over reaction. What was the potential catalyst for such an event?
Not long after a friend sent me the copy of an article in the Australian Financial Review AFR.
“Valuation raises eyebrows”, “throwing shares around like confetti”, it suggested. I needed to read no longer. The AFR, the bible for many of the Mums and Dads in the small but parochial Australian stock market landscape, appeared, at first read, to be calling into question IMU’s valuation, and with it the recent activities of some of their principals.
“You must be kidding me,” I thought to myself.
“Do people have no understanding of the current market for cancer drugs?” I questioned.
“Have they not heard of Keytruda, Opdivo and Herceptin? Have they not seen recent test results for Imugene's Her Vaxx and PD1?
Are they not aware of recent biotech startup sales in the multiple billions of dollars, for companies which treat only one, perhaps two types of cancers?
Are they not aware that Imugene's products have been successful in pre clinical trials in treating the vast array of cancers 1 of 2 of us are now facing in our lifetime?” I exclaimed.
Then I took a step back. Think rationally, I thought. As investors it is us, not the average journalist, interested in finding out all about Imugene and the tireless work their innovators and directors have exercised over decades, in solving one of the greatest medical mysteries in the modern age. As a rule of thumb journalists aren't interested in the fact that most people sell a few head shares to exercise their options. No, that probably doesn’t cross their minds. Needless to say it doesn't sell newspapers. Most of the fund managers they seek market commentary from have enough money to exercise their options. Unlike Lesley Chong they’ve been dining out for years on days like Black Thursday when they themselves can amass small fortunes off the backs of hard working Mums and Dads who panic, sell and lament, following pieces written by headline seeking journalists whose primary motivation is to sell newspapers.My mind drifted back to the articles written about Amazon, Yahoo and Google years before by countless so called “market commentators," who had questioned the said stocks at the time, with their little or no revenue and heady valuations. To the journalists who had “raised eyebrows” at the valuations of the day. Were they ever held accountable for their off the cuff remarks, attention seeking headlines and comments posted in financial articles that undoubtedly led to the demise of many Mums and Dads in days gone by?
I felt the need to say something. Just as Tom Joad in John Steinbeck's classic the “Grapes of Wrath” had felt the need to speak for the dispossessed and uneducated. To speak for those in the financial markets without a voice. For the law itself has more often than not failed to recognise financial losses at the hands of these so called market commentators. In the law of negligence, ‘lost chance’ claims arise where a defendant negligently deprives a plaintiff of a chance to realise a more favourable outcome. Unfortunately recognising the loss of genuine ‘objective chances’ as actionable damage where the detrimental outcome has materialised — challenges the status quo and the tide of recent court decisions.
“Are the Mums and Dads who have potentially lost out on these chances to partake in the greatest financial good luck stories in their lives able to obtain some financial recompense for articles written in days gone by?” I mused.
One thinks not.
Of IMU's Black Thursday whatever the catalyst was, is unknown. Was it an article? Investor nerves? Pent up anxiety, or simply lack of news?
No-one has all the answers...
“They can buy back in," said my mate who sent me the AFR article but days before.
“I don’t think so mate," I replied.
“Even if they have been lucky enough to sell and make a gain, they now have Capital Gains Tax to pay," I said to him.
“The stock is now 30% higher and as such they have to find that additional cash, which they may or may not have”.
“Really,” he replied, not realising the full extent of their plight.
“And by the way mate," I went on to say, as I could feel him thinking on the other end of the line.
“Even if they did have the courage, education and fortitude to buy back in, they would not have the strength to now, following the gut wrenching ride they have just had to endure,” I said.
No, the uphill ride is now one for the large fund managers, who were no doubt licking their lips on IMU’s Black Thursday, as they proceeded to purchase 225,000,000 IMU shares at a fraction of their future value.
But unfortunately it wasn’t confetti small IMU shareholders threw away on the day, it was real money.
Now in years to come, as Imugene’s medical breakthroughs prolong and save thousands if not millions of lives, as their company reaches more and more milestones, like the Roche’s and Genentech’s before them, the same Mums and Dads can sit and merely ponder what might have been.
“I sold Imugene when it was 33 cents," I can hear them saying.
“Don’t worry darling", shall be their grandmother's reply.
“He has dementia, Imugene was never trading at 33 cents”.
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