Greed has destroyed all my capital completely and irrevocably.” How to lose all your money and dreams on the stock exchange.
Today there will be another long-awaited full-length release of “Tears of the Pulse” on Smartlab. Let me remind you that in “Tears of Pulse” we look at the most unsuccessful investment cases of our compatriots, we are shocked and try not to repeat such crazy mistakes. Not for gloating, but for experience. We remember that safety regulations in the market were written in the blood of torn hamsters.
By the way, in my Telegram channel you can find even more materials on this topic.
Learning from the experiences of others is a very useful skill, especially in investing. Often the Tinkoff social network Pulse teaches us not only how to manage our finances wisely, but also what NOT to do.
Over 3 and a half years at Tinkoff Investments, I have accumulated a lot of interesting and sometimes very frank financial content. Accumulated both in the Pulse itself and beyond. I continue to share it with you.
Today I want to share one VERY tough, but as always, instructive stock exchange story. The person to whom it happened found the strength and courage to talk about his financial failure in order to warn others from similar fatal mistakes.
Although almost three years have passed, the story remains very revealing and important. Especially for those investors who do not yet fully understand what risk management and margin trading are.
🚀A new, unafraid crop of investors is coming to the stock exchange, and “good” brokers are actively inviting them to try a loan and play with “shoulders” and/or short positions. Typically, advertising banners indicate in large print that in this way profitability can increase several times. “Margin” is turned on by default for many brokers, as a matter of course. At the same time, if the risks of “shoulders” and “shorts” are mentioned somewhere, it is in a half-whisper and in the smallest print.
What happened?
On July 23, 2021, due to new rules for regulating the educational industry in China, TAL Education shares lost about 70% of their capitalization - the price per security rapidly fell from $20.5 to $6.
🇨🇳 The TAL group appeared in China in 2003 and immediately began to gain momentum. The company was a leading provider of out-of-school and additional education services in China, providing high-quality teaching both through a network of training centers in 110 cities in China, and through its own advanced online learning platform.
It seemed that TAL Education Group had a wonderful future ahead of it and everything was going extremely well for it: the technological revolution, a pandemic driving the whole world into an online format of learning and self-development, permission from the Chinese authorities to have more than two children... But... something went wrong.
As of February 2021, TAL was the largest publicly traded education company in the world by market capitalization (with a listed market value of over $50 billion).
📉And by July 25, 2021, its price collapsed by almost 95% of its highs and began to amount to just over $3 billion. TAL's fate hangs in the balance, or as the company wrote in its press release: "We expect that the measures taken will have an adverse impact on tutoring services and after-school education, which could have a significant negative impact on the company's results of operations and prospects."
TAL stock chart from 2018 to 2022
I myself was then tangentially caught up in the whole TAL story, but in total I only lost about $200. I remember that after this stock failure, I was scrolling through the Pulse thread in the hope of finding some comforting news about the suddenly collapsed stock. People were perplexed, some complained about the big minus, some gloated, but what stuck in my memory most were the posts of a Tinkoff client with the nickname Makkozlov - sincere and calmly doomed. In three of his publications, he briefly described the situation that happened to him and his condition.
💼Back on July 22, 2021, the investor’s entire portfolio amounted to more than 5 and a half million rubles. Of these, 1.25 million is the company’s own capital placed on the exchange, the rest is profit from successful speculation, mainly on Virgin Galactic (SPCE). With ALL this money, the hero of the article purchased TAL shares with leverage.
You sit, can’t believe your eyes and dream of turning back time a little bit.”
After the opening of trading on the morning of July 23, the investor had about 5 million 700 thousand rubles in his IIS, as he himself writes - an excellent result. He even managed to sell a small part of TAL shares with minimal profit.
🤯But then, due to a sudden, avalanche-like collapse in the value of shares, his portfolio was simply torn to shreds due to large leverage. #Тинькофф immediately turned on the “emergency alarm” and sent a notification of a margin call - this meant that all of the investor’s own money became the property of the broker to pay off the debt.
