I Still Want To Gamble On Shares

This share is a ten bagger and everyone else is wrong!

Disclaimers And Regulatory Notes
The information on this page is not advice to buy, sell or continue to hold shares in FastJet they are notes made whilst following the share as it seemed like an interesting company.

You may have seen the quote to the effect of ".... cause us to conclude that turnarounds seldom turn......"

Well this one sure didn't.

Fastjet is a ten bagger and everyone else is wrong!

I’m sure that most of us dream about the big win, maybe on the lottery, but very few of us plan our lives around it actually happening.

If you are going to try for the big one, I would suggest that you allocate say 2% of your profit from every transaction and when this is a useful amount, spend it.

This will probably mean that you only make a very high risk purchase once every couple of years, possibly only a few in your whole life time.

Fastjet, a great example, Aug 2014
At first glance Fastjet (FJET) is a golden opportunity for such a thing, they are trying to be the first budget airline in Africa following the EasyJet model and as of Aug 2014.
  • The current share price is a bit over a penny, down from around 45p.
  • The management team is experienced in this area.
  • Stelios of EasyJet fame owns about 10% of the company.
  • They have proved that there is a market, currently flying with around 80% of the seats sold.
  • There has been a recent injection of funds from people who know what they are doing.
Sure there are downsides otherwise the share wouldn’t be so cheap,
  • Complete change of strategy, bought and sold Fly450 incurring huge losses.
  • Still operating at a loss.
  • A stated intention to raise more funds.
  • Operating in Africa where the airline market is not new carrier friendly.
  • They only have three planes flying about 6 hours a day.
EasyJet has a market capitalisation of £5.2B, whereas FastJet has a market capitalisation of £26M, personally I think EasyJet is overpriced but even at more reasonable levels it would still be £2.5B. So it is easy to see that Fastjet could get to a market capitalisation of £2.6B or 100 times its current value in ten years time.

Aug 2014 - 1.4p
So imagine investing £1K, at the current price of 1.4p the reality is that you will probably not lose a large percentage of this, you will either lose it all or make spectacular gains, or so it appears.

A perfect result would see you netting a return of 100 times your investment or £100K, for most people this is a third of their retirement pot.

However it is quite likely that Fastjet will be looking for another £30M from share holders this year, this is about the same as last year and quite possibly the same again the year after. At the current market cap of around £26M, this would mean at least trebling the number of shares issued. Effectively dropping your return to 33 times.

April 2015 - New issue diluting your holding to 25% of its previous percentage
It turns out that this year (April 2015) they issued three times the current number of issued shares, meaning that your original holding has been diluted to 1/4 of what it was before and the unlikely 100 times return is now down to 25 times. Surprisingly this has had pretty much no effect on the share price.
April 2015 - One hundred for 1 share swap - 100p or 1p
They have also done a 100 to 1 share consolidation, whilst this does not affect the portion of the company that you hold, it has brought the share price up to the 100p-150p range, this is where serious shares are traded, so short term large price changes are less likely. The downside to this is that at a £1 it looks like a serious business so another 50% drop down to 50p would still look respectable.

Share swaps are often director's vanity projects, attempting to make the company look better, after all who wants to run a a penny share company it affects your future career? Sometimes they are necessary because the company is in such a mess that they are a legal requirement if more shares are to be issued.

Dec 2015 - 55p or 0.55p(pre 100:1 swap)
Taking into account the share swap, the price is now 0.55p about half on the initial investment, the share swap hasn't really helped it's just made the management feel better.

Mar 2016 - 24p or 0.24p (pre 100:1 swap)
More share price drops, an apparent row between the EasyJet shareholding and the daily management team, and yes talk of more funding required, despite a massive fund raising only a year ago.

We are now at the point that EasyJet, the reason that I thought that this might be reasonable gamble, are in a public spat around the licencing of EasyJet's rights. Hopefully this is part of a plan to get their management in and costs under control, but it may also be the end of the road.

Jun 2016 - 24p or 0.24p (pre 100:1 swap)
Load Factors down to 47% and talk of another share issue. What's important is not that another year has passed without growth, but a year has passed and huge amount of money has been spent and there does not appear to be enough left to carry on for much longer.

So almost two years after your initial investment you are sitting on holdings worth about 17% of what you paid for them.

Jul 2016 - 25p or 0.25p (pre 100:1 swap)
Another call on share holders for funds, this time for £15M and a bit more share dilution, an increase in the total number of shares by about 8%

Dec 2016 - 16p or 0.16p (pre 100:1 swap)
The share price is continuing its downward path, it is now at about 11% of the imaginary purchase price.

Jan 2017 - 17p or 0.17p (pre 100:1 swap)
More restructuring and fund raising.

Of course great returns are still possible as the company is still in existence, the problem is that you have lost out on the returns that four years of safer investing would have delivered and you are two years nearer retirement and needing to stop trading and live with what you have amassed.

For what it is worth the shares have recently surged from 0.25p to 0.5p.

It is possible to be lucky and pick a winner on your first attempt giving your pension pot a very healthy boost. Otherwise it is likely that you are hindering your pot growth by doing this sort of thing more than once every few years and with more than an almost token amount.

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