I searched few similar threads including one I created earlier on manipulation, fakery. No where I could fit my thoughts into it, hence a new thread.
Objective of thread- to share stock stories which were deception in first place and ended up as catastrophic wealth destroyer.
I am not talking about market corrections when fear grip market and it just barge downwards. I am talking about our interaction of stocks in life where we lost money or managed to escape.
Not due to sole reason of our mistakes but stock in first place was a manipulative company, meant to deceive people, created to siphon funds. The acts cannot be undone now but learnings can be passed on. I would request others to share similar stories.
I had few instances in my 22 years of experience in stock market, initial data is not available for me to represent now. My mistakes were perhaps more infatuation, a combination of tender age and parody of successful investment methods. I will share where I can represent them including lessons learnt, root cause and much more. Hopefully it would help you not to repeat some of the serious mistakes what I did in these particular stories.
Story 1: Stock Name- Concurrent India Infrastructure Limited
Impact- managed to escape from 10/12% portfolio downside
First a visual representation of stock to have a better view.
It was month of January in the year 2010. I was sitting on decent profits from 2007 bull run. Luck of course supported me when I overdrew profit for a real estate purchase and co-incidentally market got hammered out, balance of course I had capital protection point. Then you know our hands feel itchy, ego scratch the right side of brain; we feel superior. That’s how this stock caught my attention, second it was infrastructure bonhomie. Advertisements to nationalism infrastructure was stamped everywhere. Bonds to bands, television to short vision!
So, I bought this company around 9 rupees, added at 11/12 again, constantly I added till 32. All in matter of 4 months. Last few pyramids (purchase) were pretty high to my standard, you can see reverse pyramid. But I am not Bernard Baruch to road rolled lighter weight of base. It was May 4th week I woke up to a night mare and click the panic button next day. I didn’t sleep whole night, ditched the office and was extremely tense till transaction went through. What really happened in 15 days then which led me to a conclusion that I am a super idiot, nothing more.
Please note the events which you will find similarity with so many other companies.
- Company was announcing order left and right. Suddenly it acquired a logistics services company.
- Couple of interviews on Business television channel, couple of research reports calling dark horse and multi bagger.
- Unusual social networking on stock forums (that was the last year I been to that forum, after that I never look back). If you understand which forum I am talking and if you want to succeed never ever put your footstep there unless you are champion of behavioural finance which of course I am not.
- Blogging, website even CA student website; you heard it right. They didn’t even spare not a single financial website where they could go.
- Company announced second acquisition of a Pune based company.
Then of course hell broke loose and the exposure was out in open.
It all triggered with stock exchange announcement by company who was building a 25th floor tower for some 10 Cr INR. 40 lacs per floor, what match box tower? I don’t have a problem with 10 Crore projects but I do have an issue 25 floor project for 10 Cr. That sets my brain cell to do a triangulation, we call do a cross verification even if forensic is not possible for us to do.
- I call up the Srilanka JV partner to found it was absolutely an arbitrary phone number.
- Company was doing a PMSSY project even before tenders were finalised. PMSSY project office was responsive to my email.
- Checked few paper cuttings from Guwahati where original project value was 30-40 Cr given by government. Company claimed to have 70 Cr subcontract order.
- Dialled my friend in Vedanta Finance to ask whether there is a vendor master in company name. He couldn’t find at all.
- Google was helpful but the problem is just because one is not available in website you can’t say they are non-existent.
But something really made my assumptions concrete was this
## ‘enormous messaging on unrestricted forum through hundreds of multiple identification and desperate attempt to protect the company.’
2010 onwards if I see a small cap grabbing attention on public forum which is unrestricted with pompous messages I just abandon the idea. But my saving grace was accidental, I ran away after selling. But what really unfolded was more serious than I thought:
- Sikkim Hydro authority (a govt undertaking) denied giving any project to company on newspaper. Money life latched on to it and published the news. This was first blow for downward spiral. I made a point from then, will always approach a publishing agency in case of any doubt. Doesn’t matter they respond or not.
- Company scrambles to reply, obsessive messages increased manifold on websites. Money Life tighten the noose, exposes further questions on financials. A lot of people supplied information (including me) on our analysis. Money life published most of them.
- The logistic firm call off acquisition and accused the company.
- Company informed most of orders cancelled, almost bites the dust.
- The Pune company which it acquired vanished including its website.
- The company suspended finally by BSE, the last trading price was 1.13 during 2013. Five years gone by, no sign of retracement.
It has super growth result, media attention, blog writers (who preach growth investing now, irony!). It picked up hot theme of day and pumped the shares before dumping. Again, research reports given by analyst went to oblivion.
I don’t know how many people lost money in that saga, but it was one of disgusting incident I saw in front of eyes. Unknowingly or knowingly I was part of the event, to escape in the end but could have catastrophic impact.
I am leaving with various links which unfolded those days:
Point is every time we may not have a media agency coming to our help. So before jumping on a small cap, take two steps back and due a triangulation.
Suddenly my interest has gone up looking at another company here. Possibly all fine, let’s do a triangulation next week if possible.
How did the wealth destroyed, here is the picture:
Dec 2007 shareholding: promoter 0.12%, public-99.88%
Dec 2008: Promoter 14.97%, Public 85.03%
Dec 2009: Promoter 43.31%, Public 56.69%
June 2010: Promoter 32.36%, Public 67.64%
Dec 2012: Promoter 20.55% Public 79.45%
See how the distribution happened. Just map with market price like I did in Fiberweb. You will get much clarity.
I have another 4/5 real life experiences, will post them soon.
Stay safe and Best Wishes