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Lessons from BNN, MySQUAR and Other Matters

By Lucian Miers | Sunday 10 September 2017

Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

The BNN Technology (BNN) fiasco is rather a depressing reminder that it takes an event such as the resignation of a CFO, accompanied by some serious whistleblowing for NOMADs and AIM regulation to act, by which time it is invariably too late for the retail investor. This is largely because the system is inherently flawed in that NOMADs are paid by the very people that they are supposed to be vetting. This is why AIM is stuffed with BNNs ticking away like time bombs.

This is not to say that in this febrile market people can’t make money buying duff companies, particularly ones where there are sizable short positions to be squeezed. I am sure that there are those who bought BNN at sub 40p early last who exited at well over 100p a matter of months later.

Likewise, there are doubtless those who are patting themselves on the back for buying Telit Communications (TCM) at 100p a couple of weeks ago and riding the current rally. There maybe people who have an innate aptitude for such trading but I somehow doubt it. Leaving aside the numerous red flags that fluttered before the recent scandal anyone who buys into a company at any price that has been run as a one-man band for years by a man with a record of cynical and systematic fraud is always going to come a cropper in relatively short order.

There are also lessons here of course for bears in these volatile junior markets.  Price gyrations in names like Telit and Purplebricks (PURP) mean that however confident one is that things are going to end very badly for them (and I am very confident with these two) one must make sure that one has the margin and the nerve to withstand short term adverse moves.

Finally, for those who missed out on BNN, which I covered in April, I would remind readers of my thoughts on MySQUAR (MYSQ) - which I still believes makes BNN look like a solid bluechip.

This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian next week click HERE

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