Its interesting to note that most ASX companies do well for management and lead brokers, but not for shareholders. 98% of companies listed on ASX end up worthless, so its not surprising that older guys with more experience start thinking its a scam.
I definitely know the feeling, did someting similar with IHL another biotech. Lesson learnt for me is take profits along the way, its data backed that almost all companies listed on the ASX end up worthless, you know Ive posted this before but its good knowledge to have so thought I would share again, since inception of the ASX there have been around 37 500 companies listed, and only around 2300 left listed today, so only 6% of all listed companies ever listed on ASX still exist, and of that small percentage of survivors listed an even tinier fraction are profitable, only around 500 currently listed companies actually make money.
Out of those 500 companies that are profitable and paying dividends ( 1.3% of the all companies that have been ever listed in Australia) interestingly but maybe not surprising nearly half of their combined total profits and dividends come from just six companies – the big four banks, BHP and RIO, which are all more than 100 years old.
That leaves the remaining 75% or so of currently listed companies, around 1,720 companies that are not making money, barely solvent and will probably run out of money at some point which means more capital raises diluting holders and eventually suffer the same fate as the 33,000 other companies over the years that just disappear from the ASX worthless.
Its quite dismal when you look at the reality of it all, but using these stats and facts it just goes to show how hard it really it is to get a winner on the ASX, the overwhelming majority of listed companies in any given era are speculative stocks with nothing but hope and hype and almost all will disappear worthless, it really cant be argued as its data backed that 98% of stocks listed disappear worthless.
So who are the real big winners, well knowing that most stocks end up worthless, its the lead brokers who make money raising for the company in IPO and following raises, the management and staff of the company who get paid great salaries and bonuses along the way before the company is worthless, not to mention stock brokers who get commissions from all the trades made of the companies shares.
Usually its these same lead managers, directors, etc, that will then consolidate all shares, do a name change, new prospectus and do the whole thing again, this is what they call life style companies, which is unfortunately very common on the ASX, just some basic research of any company you will find most directors have been directors for decades, they usually try to dress this up as a positive , as they are "experienced" but a quick look at most directors past you will find they were directors of several companies that never made a cent for shareholders but were paying for their life style in the form of salaries and performance rights.
Basically the theme is management win, shareholders lose, its a sobering reality.
The lessons to take out of this in my opinion are not to get too attached to the story, realise that its a tiny fraction of these companies that end up making it, so if you are lucky enough to be in profit on speculative stocks might be a good idea to take some money off the table along the way. Also some basic research on the directors, CEO, etc, see where they spent the last 5-10 years, will go along way to help you not get attached, you will usually find they have gone from company to company without performing for shareholders but increased their bank balance from shareholders, not sure on the case here with IMU some long term holders will be able to answer that.
I learnt the hardway, watched my IHL holding go from life changing money, back to almost entry price, which Im sure has happened to some holders here.
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