On 12 April 1984, something happened that changed the great British public’s attitude to investing…
The government gave the green light for UK investors to buy shares in British Telecom.
It was a big deal.
Since the end of the Second World War in 1945, core British industries had been owned by the state.
39 years later, Margaret Thatcher started selling these industries off.
And it was the national telecoms provider, BT, that came up first.
Capitalism for the masses
Now you might expect it to be fat cat City businessmen and the super-rich who were first in line for deals like this.
But it wasn’t only institutions and ‘insiders’ who could invest.
Thatcher’s big drive was ‘popular capitalism’.
She wanted a nation of small shareholders to learn about and share the rewards of free markets.
And they came in droves, with the offer for BT shares more than three times oversubscribed.
It was so successful that other privatisations followed.
Gas, electricity, water, British Airways and many more.
Small-time British investors grabbed at them all.
They’d got the taste for capitalism.
And they were addicted.
According to Kenneth Baker, an MP in that Tory government: “This changed popular perceptions of the accessibility of share ownership: When we came into office, there were about three million people who owned shares in Britain. By the end of the Thatcher years, there were 12 to 15 million shareholders.”
The latest figures I could find are from 2015, which puts the number at around 12 million.
I’m surprised it isn’t more, to be honest.
But it’s still a decent percentage of the population.
The world’s best performing asset over the long term
The fact is, a lot of us see the stock market as great place to grow our money.
And that makes sense.
Over the long term, stocks have outperformed all other asset classes.
There’s plenty of evidence of that.
But I guess the dream investment is one where you put a small amount of money in…
And it turns into a huge gain quickly.
That’s what we want, isn’t it?
No prizes for guessing which market’s been winning on that front lately.
Nothing comes close to the gains seen there over the past few years.
A £500 investment in bitcoin a year ago would be worth £5,000 now.
Some of the other cryptos have done even better.
But let’s take cryptos out of the picture for a moment.
Don’t worry, we’ll come back to them another time, as there’s plenty more to come from the crypto story.
Before they came along, though, it was shares.
They were the beacon for small-time investors.
I’m sure they’ll be the go-to investment for many for a long time to come.
And for the right kind of people, there’s an even more exciting way to invest…
Shares for the brave
Back in the early 1990s there was a great newsletter for intrepid private investors.
It was aimed at ordinary people rather than City insiders.
And it unearthed opportunities for extraordinary investment returns.
At the time, there were plenty of stock market newsletters.
Maggie Thatcher’s ‘popular capitalism’ created such interest, there was a huge market for investment ideas.
But this wasn’t your typical stock market tip sheet.
This one was for a special kind of fearless investor.
People with plenty of spare cash… and the guts to invest it in young, unproven companies.
It was called the New Issue Share Guide.
Anyone remember it?
I know Canonbury boss and Monkey Darts’ publisher, Nick Laight, does.
Nick was involved when Fleet Street Publications published it years ago.
What made the New Issue Share Guide different to other newsletters was the kind of stock it was tipping.
The clue’s in the name!
Getting in at the start
These weren’t the kind of Blue Chip shares you find in the FTSE 100.
This was all about finding companies issuing shares to the public for the first time. Initial Public Offerings or IPOs for short.
That didn’t mean they were brand-new companies or start-ups.
They may have been in business for some years.
But as privately-held companies.
They were coming to the market to look for new capital investment.
And the idea of the New Issue Share Guide was to tell its subscribers about the latest IPOs. Ones to invest in. And ones to avoid.
When these newly-listed stocks get an injection of capital, and use it to develop the business, they can grow quickly.
And that can mean big returns for investors.
I’ve just been reading about a small privately held oil services company called Sondex.
Its business was making drilling equipment and other tools.
The kind of thing used in oil and gas fields.
Anyway, Sondex floated (came to the market) at a price of 100p per share in 2003.
And just a few years later the company was bought in full by US conglomerate, GE, for 460p per share.
That’s four and a half times their money for those early investors who picked up shares in the IPO. Pretty good.
Not quite as impressive as online fashion retailer, ASOS, though.
1,914 times your investment!
The new issue for that one back in 2001 were priced at 3p per share.
Today the shares change hands for 5,743p.
That’s 1,914 times it’s gone up.
Which means if you’d invested £500 at the IPO, it would be worth £957,165 at today’s prices.
OK, that’s exceptional and you’re unlikely to get that kind of return.
But it happens.
It’s clear there’s money to be made in these early stage investments if you can get it right…
You’ve just got be prepared to take on the risk.
That’s the other side of the story.
Some of these IPOs turn out to be duds.
They’re priced too high and if appetite for the shares dries up, the price can plummet.
Or perhaps it turns out the management team at the company isn’t any good.
They make some bad decisions and the business goes into reverse.
In the worst-case scenario, that can mean the business goes bust.
And if that happens, it wipes out your investment.
Usual common-sense rules apply
It’s the same as any type of investing or trading really.
Whether it’s cryptocurrencies, forex or investing in new issue shares.
You need to think about spreading your risk.
Don’t put all your money into one idea.
Diversify a bit so that not everything is riding on the one idea.
And that’s especially the case with this kind of early stage investment.
Only risk money that you can afford to lose if it all goes belly-up.
A small amount that you won’t miss – but that could grow into a decent lump if it takes off.
If you like the sound of this kind of early stage investment, keep an eye out for new IPOs.
If you have a friendly stockbroker, they’ll be able to tell you about any new IPOs coming up.
Some big players like Hargreaves Lansdown have an email service to alert you to new IPOs.
And if you’re eager to learn about early stage investment ideas, keep reading Monkey Darts and drop me a line to let me know you are keen to hear more…
I’ll be exploring other ways you can get in on exciting investment stories at the ground floor.
For example, there’s one I’ve seen that lets you invest as little as £25 in a company you like the sound of. (You can’t really invest such a small amount in regular shares…)
It’s a great way to risk a small amount for the chance to make a decent return… and enjoy being in from the very beginning!
I’ll tell you all about it soon…