Ask Colin

I have a question that I hope you might answer for me. Biota Holdings price has fallen faster than a speeding bullet with no support insight except for zero dollars. I know that when the price was around $4.40 there was a future earnings downgrade that started the slide. ( Not enough people catching the flu in the northern hemisphere.) My question is where is the pressure coming from to push the price down? I could not in my worst thoughts imagined that it would go so low.

Markets are driven by fear and greed. Biota's price was driven up by greed and is being driven down by fear. Fear is when speculators can smell corporate death.

I think you sound like a very naive investor. Everyone has to start somewhere and I spend a lot of time trying to guide people in their learning. However, you have made some very basic mistakes here, starting with not knowing enough before you started putting real money in the market. It is not a game. It is about assuming risk. You have assumed risk you do not seem to understand or know how to handle.

Biota is a very speculative company, which makes losses. Not profits - losses. It has raised money from speculators (called shareholders in polite company) and is trying to develop a product that will earn profits. It is really like a mining company - it is a race to find something that gives a payback before the money runs out. When it runs out, the shareholders own worthless shares. Biota came from a price of a few cents in 1990, there is every indication that it is on the way back there. I hope not, but I am not betting on it at any odds.

Any company can fail - HIH, Harris Scarfe, One Tel and a long list before them - it is all there in the history books. There are lots more to come. Many die quietly only mourned by the silent shareholders, but others go out with fireworks. If you thought it could never go so low, you did not understand the type of company you had speculated in. Far more sound companies have fallen from the sky - have a look at the price chart for Burns Philp - once an establishment blue chip company selling for many dollars per share, that had a near death experience at about 3c.

The thing that concerns me most is that you seem to be still holding Biota. When you buy any share, you must know what price movement would indicate that the premise on which you bought it was wrong. This is where you get out. It is called a stop-loss level and is like an ejector seat, so you do not ride the thing down in a death dive.

Sorry to be a bit hard on you, but you need a "cold shower" before you do more harm to your financial health.

Sell the thing and keep out of the market till you learn what you are doing. If you do not have the time or inclination to learn the profession of investing, and it will take years, then invest through a diversified group of professional fund managers.

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