Should I buy BTCL shares?

Correspondent | Monday February 29, 2016 15:21

Are the Shares Worth It?

The big question is, are they going to go up in value, and can you sell them for a higher price than you bought them for? The answer to this is simply: you don’t know. We all realise that there’s no such thing as ‘free money’. In order to make an easy Gain, you expose yourself to the potential risk of loss.

 

Educate yourself.

One of the best rules is, don’t invest in things that you don’t understand. That means you have to educate yourself, and if you’re not sure, then you need to speak to someone who knows – and that someone must be on your side.

Vanessa hasn’t ever invested before. In fact, she’s not sure what exactly “a share” or “an equity” is. She’s heard that BTC are having an IPO, but isn’t clear on what that is. Should she invest, or not?

 

What is a share?

A share is simply ownership of part of a company. Most companies have many shares which can be owned by many different people. The person or group of people that own the majority of the shares, control the company.

 

How much does a share cost?

For a public company, the price of the shares is agreed at a Stock Market, where sellers offer shares for sale, and buyers bid for the shares that they want. The price of shares in a Stock Market go up and down, depending on how many buyers and sellers there are. If there more buyers than sellers the price goes up, but if there are more sellers than buyers, the price goes down.

During this Initial Public Offering (IPO) BTC shares are being offered at P1.00 each. That price has been set by the seller as a starting price. After the offer closes, the shares price will depend on the buyers and sellers on the Botswana Stock Exchange (BSE). That means they could go down in value or up in value, depending on the number of sellers and buyers.

 

What is being sold at BTC?

Firstly, the bits of BTC that make the whole country’s communication systems work, have been moved to BOFINET – this part is not for sale. However, for the remaining part of BTC the  Government is selling 49%. That means the Government is keeping Bofinet, plus 51% of BTC.

 

Get independent financial advice

Some financial advisers are tied agents of one company – in effect they sell the products of just that company. Others are independent – that should mean that they are on your side – but always be careful if someone tries to sell you a financial product without taking time to understand your financial position and what your money goals are. You can find independent financial advisers by contacting ABFA - the Association of Botswana Financial Advisers through their website 

 

Investment The fundamentals.

In general, you make money in investments by buying low and selling to someone else when the price is higher. You need to do some research to find out whether you think the Offer Price of P1.00 is too low, or too high.

 

Motivated by Greed

The bottom line is that investors in markets are motivated by fear and greed. The world most famous investor, Warren Buffet is quoted as saying: “be fearful when other people are greedy, and only be greedy when other people are fearful”

 

Borrowing to invest (Gearing)

When you borrow money to invest, you are really increasing your risk.  Your investment will have to earn you more in a year than you have to pay in interest on the debt. So if your investment grows in value by 20% and your interest payable on the loan is 15%, then you will make a profit of 5%.  However, if your investment only makes 5% growth, where will you find the extra 10% to pay for the loan interest?

When it Works:           20% Growth minus 15% Interest = 5% profit!

When it Fails:              5% Growth minus 15% Interest = 10% loss!

This can lead to a serious situation that might leave you more heavily in debt.

When it’s Disastrous:  10% Fall minus 15% Interest = 25% loss!

Remember, once you have bought BTC shares, you can only sell them to other citizens. This means that the market for selling shares is more limited because you can’t sell them to foreigners, or even to investment funds who might have non-citizens as clients.

There is no easy way to know if an investment will be a good investment.  You should know the product you are buying, and who you are buying it from.

You should ask for confirmation of who they are and who they work for. You should ask lots of questions, and where possible, seek the advice from a professional advisor.

Once you have done all of your due diligence, and only if you are still comfortable with the investment, then you can buy the investment.

© S.C.I. Training (Pty) Ltd run BQA accredited Financial Wellness Programmes in Botswana. We also offer Financial planning and Debt Counselling Services. For help and information contact us on 3180111 or 72309718 or email money@wellness.co.bw