The Pit - IMI Trust

With the ASX 200 and the Dow Jones Index consistently achieving new highs, investors have now started to seek investments with higher risk and higher growth potential. Many sophisticated investors realise that this occurs before companies hit a stock exchange.

Sophisticated Investors, Retail Investors and Professional Investors are now seeking to invest in the companies of tomorrow. By investing in start-ups or early stage businesses they can reap large rewards if the companies lists or is bought out.  On the flipside, there is every chance the company could fail.

Why would they do this, when everyone knows the risk associated with companies in their infancy? Risk vs Reward is the simple answer. 

Investors are now looking to allocate risk capital to these companies as part of their portfolio.  When looking at asset allocation in a traditional portfolio, you tend to see cash, property, conservative investments, growth investments and aggressive investments.  Typically, early stage investment is seen as aggressive but in reality it sits in its own band even higher.

The rewards are great but the chances of losing money are just as high.  Which is why only risk capital, or in layman’s terms, money you can afford to lose, should ever be placed in these investments.

Even only as far back as 3 or 4 years ago, this kind of investment was only available to the wealthy who acts as business angels or venture capitalists.  Today, companies such as the Australian Small Scale Offerings Board (with whom IMI Trust is a member of) is making it easier for investors to gain access to these type of opportunities.

Early stage investment is an exciting prospect but carries heavy risks.  Investors should carry out their due diligence, ask questions, find out as much as they can about the Company, its Management Team, the Market, the Competitors and the Marketing Strategy for success.  By analysing these aspects, an investor can see if the Company is doing its best to be successful.

And by success, this can be defined in a number of ways.  As an early stage investor, a good result is a company takeover or a public listing.  Today’s penny dreadful may be tomorrow’s dollar dazzler.

Companies are looking for early stage investment but do they deserve the capital from investors?  Many don’t but some do.  To learn more, about emerging growth companies looking for early stage and expansion capital, click here.  Or if you have any stories to tell about early stage investment, please tell us here. 

The new Apple iPhone flew off the shelves in the US after many months of hype.  Incredibly, consumers still parted with $600 (3 times now that on eBay) for a phone that is limited in functionality.  Even when you look at the basics, you can see where the issues are for the average phone user.

• Basic Camera 
• No Video Recording
• No MMS
• No Custom Ringtones
• No Speed Dial
• No Voice Dial
• No Flash Support

As is always the case with technology, Version 2 should be a lot better.  We hope

There is a famous saying in hospitality:

“The answer is yes, now what’s the question?”

The sentiment behind this is that the customer is always right.  The customer has a need that requires fulfilling.  There are many companies that follow this customer-orientated ethic.  Starbucks is one, as no drink is ever not made no matter how crazy the concoction may be.  If that’s the way they want it, then that’s the way they get it.

In the corporate world, and in particular financial services, there are several companies that try and maintain a business model that revolves around this attitide. However, at which point does corporate responsibility take over?  In many instances in business the customer is not the best person to ask for direction or opinion. In fact, they are absolutely the worst person to ask.

Customers should have an end goal and how that end goal is reached should be down to the service provider on how it can be best achieved.  This is the basis of good business.  It’s a Win/Win situation.

There are some business relationships that, from the beginning, that it is clear that it is going to be a Lose/Lose situation.  Why do we enter these?

Have you knowingly entered any of these before and has the outcome been different to how you expected?

This week the Australian Financial Review reported that 80% of the 96 companies which listed on the ASX this year, had their share price go up in the first day of trading.

Empowernet International (ENI.AX) is not one of those companies. In fact, on their first day of listing, their share price went down nearly 50%. Better yet, after a few days, Empowernet went from its list price of 0.55c to around 0.07c. For IPO investors, this signifies an 80% loss on their holdings to date.

If you do not know who Empowernet International is then you’ll see their main revenue stream derives from onselling Anthony Robbins personal development products and merchandise. Key person/company dependency. Check!

Empowernet International doesn’t have a written contract in place guaranteeing exclusivity either. No owned IP. Check!

Results can also be uncertain if their are changes to the marketplace - Few corporate processes or systems in place. Check!

When a company lists it needs to be able to drive by itself with the management team being custodians of the vehicle. If these continuity issues aren’t resolved then the market loses confidence and share prices fall. Incredibly, the one of the directors of Empowernet had the exact same issues when listing Sales Pursuit.
Our advice to Empowernet to get the share price up is a three step process:

1. Change the company name to Empowernet Resources International.
2. Announce that the company is now actively exploring Western Australia and Queensland for Uranium, Copper, Nickel and Gold.
3. Announce that the company was in negotiation to supply China and India with the new found resources.

If they did this, the share price will be hitting $10 or $20 in no time. Virtual miners are big on the ASX at the moment.

On Wednesday 426,000 new trading accounts were reportedly opened in China. This amount was up on the average daily opening of accounts of 300,000.

That is insane! This is equivalant to the entire population of Australia opening an account over the next 50 days.

I am sure that there are kids coming up through Uni looking at Stock brokers as the new doctors. In fact, it is common place that social conversations through university students and adults, is based around the action taking place on the markets.

A couple of weeks ago, they announced a trippling of the taxes on trades being placed. Whilst the market took a 6% hit, it didn’t stop over 400,000 accounts being opened. Now the word bubble is starting to enter the market place. The Shanghai Index has nearly doubled this year alone.

What’s interesting is the contrast to the last exhchanges to experience a bubble, and have a dramatic pop. Whilst almost every exchange on the planet has their indices hitting all new highs, there a 2 notable absentees from that list. Tokyo’s Nikkei index and the US tech focused NASDAQ.

Both of these indices are a long way from their highs, and it has been severals years since they collapsed. What is more… they both have a long way to go, to reach previous highs. The companies which fill those indices are also a long way off their highest share prices.

With so much cash in the markets at the moment, any brief down turn are being corrected by share buy-backs or private equity. This is giving investors confidence in US markets, but it is the hype around IPO’s driving forward the excitement of the Chinese stocks. 

So whilst Chinese Stock Brokers are the flavour of the last few years, the future may hold some interesting challenges ahead. What is one to do when the hype which has inflated the market, is dramatically let out?

When we tell companies that we deal in both web and marketing they think we are pulling their leg.  Most web companies don’t have the first idea about marketing and most marketing companies are clueless about the web. 

Graphic designers and web designers are often focused on technical and visual aspects of a site whereas marketing specialists are hellbent on getting their message across.  The issue is that if favour to much of one the other falls down.  The internet is littered with websites that are exceedingly functional but have no visual appeal or they are incredibly, knock your socks off beautiful but impossible to navigate around.

Are there any examples you know of beautiful, functional sites?

Imagine if you woke up stupid every day, with a hunger to learn, grow and evolve! That is the difference between the minds of innovators and routine.  Actually, it would probably be immensely frustrating that you have to start from scratch every day but in essence, innovators are those who wake up looking to pioneer.

Innovation is about looking at problems or gaps with new eyes.

When News Corp saw computerisation take hold they revolutionised the newspaper industry by streamlining and templating the whole process.

When Apple and Steve Jobs were being a thorn in the side of PC manufacturers Apple were busy conceiving how the music landscape would be changed forever.

It is interesting to look at the increase in Apples share price when Jobs is there… and when he is not.

1986 to 1998 Minus Steve Jobs - 120%

1998 til today with Steve Jobs - 1240%

Anyone else notice the difference innovation can make? What inspires you?

Time to get things off our chest…

It is our experience to steer clear of search engine marketers who boast badges with the Google AdWords Professional qualification.

Let’s be clear.  We, at IMI Trust, love Google and so should you.  It is the reigning champion of search and rightly so…however…

The Google AdWords Professional qualification can be earned if you, as a marketer spend $1,000 per month with Google.  Some people spend much more than this in a day.  Not because they are clever, or skilled in search engine marketing, but because they see the value in this type of advertising.  As they have spent that dollar value they qualify as being a Google AdWords Professional.  Can you begin to see where the issue lies?

There is no qualification in place and people can claim to be an endorsed professional.  This fails in a number of ways.

1. Punters that need help in Search Engine Advertising are looking for reassurance and expertise.  The Google AdWords Professional provides neither, though the name alludes to the fact it does.
2. Professionals who are great at Search Engine Marketing have more trouble finding work because they are competing with thousands of clowns who don’t know their KPI’s from their CPC’s.
3. Google is diluting its brand by offering this nonsense award.  Google do have other qualifications that are far more meaningful but as this is the easiest to achieve because you just have to spend dollars.

We are not against people becoming search engine advertising experts but if they claim to be experts there has to be more to it than that.  Which reminds me…I’ve got an email to answer about claiming my Fijian Medical Degree.

After the rumoured $70bn merger of Yahoo and Microsoft kind of went wet, news so astonishing began to come through the wires that if it happened I would believe that anything could happen. 

A couple of smart Merrill Lynch analysts figured that BHP Billiton is massively undervalued. Its divisions are worth more than the sum of its parts.  The multi-national resource conglomerate has a market capitalisation of approximately $117bn but if you split up all its divisions into individual resource companies the assets would be worth approximately $242bn.  Sounds great huh?  Let’s do it.

Perhaps in response to this analysis there has been speculation regarding BHP and Rio Tinto merging.  That would create a company worth over $250bn and surely would be protected from any kind leveraged buyout.

Please don’t tell me there is a bank or group of banks able to facilitate a quarter-trillion line of credit to buy a company?  If so, can I have Lo-Doc mortgage from you and don’t look to closely at my financials.  Thanks.

That would be a common sense play.  Who knows what will happen next?  Apart from a glut of Hedge Fund managers jumping off building tops because they didn’t know when to hold ‘em or when to fold ‘em.

Anyone have a spare $11bn?  Check down the back of the sofa.