First Share Purchase and I’m Petrified!

Hi Scott,

I have just learnt that the value of shares I own have dropped by $5,000 since last week, from $25,000 to $20,000. In April last year I purchased them at $30,000, so they had already dropped $5,000. I want to sell immediately, but I talked to my girlfriend last night and she suggested I contact you. The shares are Audio Pixels, which is an audio company. This is my first ever experience with shares, and I want to cry. I have a high mortgage and can’t afford to lose $10,000 grand. I am petrified if I leave it there, but hate to take such as loss. Please help me quick!

Paul

Hi Paul,

Admittedly, I’d never heard of this company before, but Audio Pixels Limited has a very new-age sound about it:

“Audio Pixels Limited was founded in July 2006 [and] has developed a revolutionary technological platform for reproducing sound, thus enabling the production of an entirely new generation of speakers that will exceed the performance specifications and design demands of the world’s top consumer electronics manufacturers.”

Sounds impressive, but then my ears began bleeding as I flicked open their latest 2017 annual report:

Over the past five financial years Audio Pixels has lost a total of $17.76 million.

And in the past 10 years it hasn’t turned a profit … and there’s not even a squeak of the revolutionary speakers.

“A material uncertainty exists that may cast significant doubt on the Company’s and Group’s ability to continue as going concerns”, says their auditor Deloitte.

That doesn’t sound good.Paul, there are three rules I apply to investing:

1. Don’t invest with money you can’t afford to lose.

2. Don’t put all your money in one stock.

3. Don’t invest in businesses that don’t make any money.

Cobber, you’ve broken all three!

So what should you do?

Don’t pray that the share price returns to what you paid for it … because the share market is tone deaf to your prayers (much like Audio Pixel’s speakers). If I were in your shoes I’d sell this stock immediately, pay down your mortgage, and buy some Sonos speakers.

Scott