Just a a few days more than a week to the running of this years Melbourne Cup and an incredible amount of money will be gambled on the " race that stops the nation " ! For a few minutes in the first Tuesday in November the streets are virtually deserted as people crowd into pubs and clubs to watch the race.
Most gamblers have the hope that one day they will bet on a horse the bookies have at a hundred to one - and it will romp home for them. That is not likely to happen in the Melbourne Cup, but two Australian men have just become billionaires by way of their wise investment on that other gambling forum, the stock exchange.
The combined wealth of the company founder and chief executive of a firm called " Afterpay " reached four billion dollars recently. It was listed on the Australian stock exchange in 2016 at just one dollar per share and found favour with investors. It climbed steadily up the leaders board until a recent announcement that it had struck a deal with Westpac to offer banking services to its 3.2 million customers sent the share price to a high of $ 101.94 a share.
Afterpay is in the business of financing " Buy now - Pay later " deals and obviously investors think it has a bright future in the aftermath of this coronavirus lockdown. When its company prospectus was launched the public was invited to buy at the basic price of just one dollar a share.
Now those investors have to make new decisions. If they sell their shares they will make a handsome profit of more than a hundred dollars on each share, or they can hold their shares in the expectation of rich dividends from the profits the company makes, but shares are subject to market conditions and can fall as well as rise.
For the lucky people who bought Afterpay shares at one dollar a share at the launch this is like backing a winning horse at odds of a hundred to one. To many people, the stock market is a complete mystery and it may be helpful to list the basic rules that apply for those thinking of trying their luck.
The minimum outlay to buy shares is five hundred dollars worth. You need to arrange the purchase through a broker, who makes a charge for that service. All the banks and most accounting firms are brokers and one of the big banks offers the best rate of just $19 per transaction. Others are more greedy and charge over a hundred dollars for the same service.
If it is a new firm listing on the stock exchange the offering may be one dollar shares, but sold at a premium. Shares of existing companies change hands at whatever their price on the share boards and this is constantly changing, up and down on a minute by minute basis. Once your purchase has been confirmed, you usually have three days to pay the amount owing.
The wise investor is constantly watching the movement of share prices and following company reports in financial newspapers and you should remember that hundred to one horses coming home are usually fairly rare events. It is usual to make losses as well gains in share trading.
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