16th Nov: Cut those losses even if you think it is too late

@TraderTim5PROX, Twitter1 Comment

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I thought it was about time I updated the blog. As mentioned, posts might not be as thick and fast as they once were, but the plan is to get back to semi-regular posting. I’ve been out for about 6 months now. It’s interesting coming back to the stock market. I haven’t been staying up to date on the latest happenings. I’ve been removed from the world and the noise of penny stocks.

It’s a noisy place out there

As mentioned, I’ve had my head out the game for a good few months now. It’s nice to be back, but I wasn’t itching to come back. Investing is enjoyable for me, but fundamentally it is a means to an end. A way to make money, which frees me up to make choices and decisions in my life without money being such a concern. I haven’t had the urge to buy this stock or that stock over the course of my 6-month hiatus. In fact, I’ve been more than happy to let the FTSE highs pass me by.

However, one scroll down through my Twitter feed and the buy-bugs were back. Reading Tweets talking about delayed buys, re-rates and endless amounts of rocket emojis, was enough to make me want to log in to my broker account and buy the latest hashtag. Thankfully, I didn’t, but the immediate urge was to jump straight back on the horse without any due care and attention. No research. Nothing. Once common sense has set in, I climbed back down. That said, I thought it was interesting that Twitter had this effect. A powerful draw to the latest hot-stock creating an almost irresistible fear of missing out feeling that is hard to tame.

Most readers, including myself, spend a lot of time on Twitter. It’s a great tool to share news, thoughts and collaborate. However, as people are also aware, a great place to spout utter nonsense and create unsustainable hype around stocks that leave a lot of investors badly burnt. Every investor is different and it’s not for me to say Twitter is good or bad, but a reminder to beware of the noise.

Some things never change

6 months out. Still plenty of the old crap being peddled. It’s great to look at Twitter and still see 88 Energy being touted. I’ve seen some trying to suggest that Proxama is beginning to turn around, and old favourite ADL is still being pumped by some. I was half-expecting to see a resurgence from African Potash or CloudTag – stranger things have happened! You can easily spend months and months chasing the tale of a stock, which is going round and round. More commonly, it’s actually going down and down – and you’re losing a shed load of cash in the process. It baffles me how difficult it is to let go of certain stocks.

Proxama is a good example. Proxama was a stock that I thought had potential. I hold my hands up. The down trend, to where it is now, was obvious in hindsight. In my opinion, it will continue to head downward. That said, I lost money on this stock back when I thought it had potential, and before the cracks began to surface. Nevertheless, it is a beneficial skill as an investor to know when to cut your losses and get out. Luckily, through the blog, I have a decent record of my thoughts throughout this process, which I have summarised below. I actually got out way too late, but even my belated exit was enough to spare a significant amount of capital. Unfortunately, some out there are still praying that Proxama will benefit from a reversal in fortunes.

23rd Sept: Announcement I had bought Proxama
I announce via the blog that I have bought Proxama stock. This was off the back of the news that Proxama entered into a partnership with Google. The company were recently one of two companies included to be certified by Google to deliver Physical Web user experiences for consumers. The entry price was 1.25p, bought amid all the hype. Mistake number one. Never panic buy.

29th Sept: Plan to Sell Digital Payments Division
Proxama announced the plan to sell the Digital Payments Division and that the Board expect the “Strategic Review will complete by the end of 2016”. The company state their focus on proximity marketing, which gives brands the ability to target ads to people based on physical location. I give my opinion at the time:

“The data Proxama will be able to collect and sell to Data Management Platforms will be extremely valuable to brands, agencies and trading desks. No other companies have this data … Recent deals with Royal Bank of Canada, GLACÉAU smartwater (a division of Coca Cola), Skyscanner suggest[ed] that there is a healthy level of demand for the technology”

I’m not ashamed of this analysis. Clearly, it didn’t turn out this way but was the decision to buy was based on facts. Penny stocks require some risk. This comes with the territory. Proxama was a unique offering and was transitioning. The Naked Trader suggests buying companies that are shaking things up a bit and this is what Proxama suggested they were doing. Refocusing.

9th Dec: General Update
Over 2 months later – no real news in the meantime. I do this write-up due to a reader requesting it, so this isn’t off the back of any RNS. A paraphrased opinion below of Proxama at this time:

I’m getting a little impatient with Proxama to be honest … News flow is a little quiet if I am honest, I was hopeful of a couple of campaigns due to the Christmas period. However, these haven’t seemed to have happened. … This concerns me a little because it seems to counteract the statement of “growing pipeline of similar campaigns still to come this year”. In truth, I am a little unsure. I hope the news will drop soon and that should correct the share price. However, the longer the wait, the greater the uncertainty.

Less confident and a little frustrated at this point. One of this important factors for Proxama was going to be the adopters of their new technology. Therefore, that’s what my bullish opinion (in the previous article) has been largely based on. However, no campaigns or commercial deals had landed since. This seems contrary to what management had indicated, so red flags were beginning to appear.

13th Dec: Delay in the Sale of Digital Payments Division
This announcement on 13th December 2016 was that the planned Sale of the Digital Payments Division, which the Board had previously indicated would be tied up by the end of 2016, would now be delayed.

My thoughts:

If you’re sold on the Proxama story, you’ll no doubt treat this as a mere blip in the road. However, if you less invested emotionally then doubts will be beginning to surface.

Personally, I think the company have something to offer. I will continue to hold I think, though doubts are beginning to creep in.

Undoubtedly, this is when I should have absolutely sold. Cut my losses and run. Maybe it was the feeling of Christmas positivity, but with this delay and concerns over the lack of commercial deals – I definitely should have got out. I didn’t and I paid for it.

24th Dec: New Contract
Proxama provided an update announcing that they have entered into an exclusive new revenue share contract with Limited Space.

“Important news for the company. Not groundbreaking, but important given that it had recently suffered a blow to its share price.”

A fairly innocuous update. Not much that can be read into here, it did give figures and timelines, so was better than those non-committal bullshit RNSes that you get on AIM.

11th Jan: Expansion Update
Where’s the money? Another update, but no real revenue. In state in reference to the company building it’s techonology’s footprint:

“No good building a big network if brands are going to make use of it. Plus, if the numbers we are told are true, the network is big enough to cater for a decent volume of campaigns already I would have thought. The alternative is that commercialisation is being prioritised, but it is falling on deaf ears, which is probably worse. Either way, it doesn’t fill me with confidence.”

Very concerned at this point – baffled as to why I haven’t yet sold to be honest (reading it back now). The commercial flow of deals that I was banking on, when I invested money, had not materialised. I was also concerned with management. There were no updates, interviews or anything. They had missed the Digital Payments Services sale deadline. They promised a pipeline of commercial deals, which in 4 months had yielded one deal with the charity, Alzheimer’s Society. Why haven’t I sold yet?

24th Jan: Pointless Non-committal Update

Proxama announced a joint agreement with CPI Card Group, a NASDAQ-listed financial product and services company. Unlike the other innocuous update, this is a pointless non-committal update. I don’t really draw much from it other than it’s annoying when AIM companies announce these type of things.

11th Feb: New Contact (for Digital Services Division)
Proxama, Digital Services Division, announce a 5-year contract with a leading South African insurance and financial services provider. This was accompanied by news that Proxama had entered into a death-spiral financing agreement with Darwin.

Investors won’t be entirely happy. They are still awaiting an update on the divestment of Digital Payments Division, which was originally billed to happen before the end of 2016. The process has been delayed, but I feel that investors – including myself – are due an update on this. Communication is not a strong point of the Proxama board.

The longer the wait, the greater the uncertainty. A maxim that is certainly being reflected in the share price of late.

Why haven’t I sold yet?! Seriously, why?

12th April: I sell Proxama
I announce that I have sold Proxama.

Finally.


I give the death-spiral finance as the main reason, stating: “It was at that point I should have sold”. In reality, I should have actually sold a lot earlier. The signs were there.

“If you cling on to the fact that the company has potential, you lose sight real picture. This is simply lazy investing – focusing on what might happening, rather than what is actually happening. I was guilty of this with Proxama.”

This is absolutely true. I was partly right then, I could have sold them. With the benefit of 6 months of hindsight and reflection, I realise I could have sold a lot sooner and saved a lot more cash.

Anyway, I recount that partly as a learning exercise for myself and anyone who wishes to read this post. However, hopefully, it is a reminder of how blinded you can become when you hold a stock, particularly one that you think has potential or a unique offering or some je ne sais quoi quality. It should be clear to everyone how much earlier I should have sold Proxama – the signals were there!

I sold at 0.29p – making a loss of 75%. However, the stock is now (at the time of writing) at 0.0255p, so it had dropped significantly further still. A belated exit is better than clinging on in there, a lesson that I too often forget.


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One Comment on “16th Nov: Cut those losses even if you think it is too late”

  1. CEO John Kennedy of Proxama – whom resigned when he heard investors where planning to remove him through large vote – turned down an offer to sell DPD for $10m as it was apparently “undervalued”, then went on to sell it for $1m, what a disgraceful CEO.

    Whilst being CEO of SOLG he also held a senior role in the NHS, its no wonder Proxama went downhill with somebody like himself running the show.

    Anyone would think he wanted it to fail.

    John Kennedy is the name – Record that name in your diary of companies to avoid investing in when he is present.

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