I’m a Sirius Minerals (LSE: SXX) shareholder and I’m losing money on it — sounds a bit like an Alcoholics Anonymous introduction, doesn’t it?
At the time I’m writing, the shares are changing hands at 4.3p, and I paid 18p each for mine — so I’m sitting on a 76% loss right now. While I always knew my investment was going to be a risky one, I always thought the key risk was going to be the nature of the final funding package and the degree of dilution I was going to face.
I never thought a bigger risk was going to be an inability to secure a funding package at all. To me it echoes Donald Rumsfeld’s famous quote about “unknown unknowns.” No matter how thoroughly we think we understand an investment’s risks, there will always be risks we simply have not considered.
My heart ached when I read a BBC story of one investor who had cashed in his entire £30,000 pension pot to buy Sirius Minerals shares. I really don’t want to sound like I’m criticising this chap with hindsight, but risking my entire investment pot on a single company is something I just would not do, ever. Not even for what I consider the safest of safe investments, for example something like Unilever, never mind something as risky as Sirius Minerals, which is still years away from profit even if it does survive the current crisis.
If you had gone all-in on Sirius Minerals, there’s not a lot you can do now but hope. Yet there’s another common reaction from shareholders that is, I think, a big mistake — summed up by thoughts like “there’s no point selling at such a big loss” and “they’re so low they’re not worth selling now,” both of which I’ve seen in recent days.
No, whether to hold any shares should, in my view, be decided only on your current assessment of the company in the light of all new knowledge. Now that the latest bad news is out, and considering what potential might be left versus the now-heightened risk, how do you rate the valuation of Sirius Minerals shares today?
It’s still money
If I decided I wouldn’t go near Sirius shares now, I’d be on to my broker to sell — and the size of my loss is utterly immaterial. My holding is currently valued at just a few hundred pounds, but is that so low a sum that I wouldn’t bother picking it up if I saw it in the street? No, of course it isn’t.
When you consider the value of a crashed investment, ask yourself if it’s a sum you’d be prepared to take from your savings and drop down a drain. If your answer is no, then I say it’s definitely still worth considering selling regardless of the size of your loss.
So what will I do? I’m not optimistic enough to buy today at 4.3p, but at the same time I’m not sufficiently pessimistic to see a clear sell here. I can’t help feeling the price is probably about right considering the events, and I’m holding.
Alan Oscroft owns shares of Sirius Minerals. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.