Page 27 - DIY Magazine June 2018

Secondly, is liquidity a function of the size of the issue, or is the number of investors? Logically, the more investors an issue has the more liquid it should be. What else drives suitability? Perhaps how safe is the investment? Is sovereign debt safer than corporate debt? Once investors move out of mature market sovereign debt (US, Germany, et al) to emerging countries (Venezuela, Zimbabwe, et al) the risk of default increases.
Then you have black swan events, Ireland and Greece required an EU bail-out, but they weren’t viewed as emerging market issuers!
Corporate debt is logically considered to be more risky than mature market sovereign debt; but are corporates such as Apple, riskier than, for example, Italy? Are non- investment grade issuers riskier than buying debt issued by emerging countries?
With hindsight we all know the correct answers and investment decisions, but none of us are gifted with seeing into the future (apologies to any readers
who have this gift). Ultimately, investors must take responsibility for their own actions, Caveat Emptor, and in return issuers must provide clear and accurate information in a format an investor can understand.
Maybe, the length of prospectuses needs to be considered, 100 pages plus? Perhaps, a separate summary that points investors to the risks and relevant sections in the prospectus is required. A good example of this is the Information Booklet used by ORB issuers, it isn’t a marketing tool its an abbreviated summary of the prospectus that every investor should be expected to read before deciding to invest.
Please remember this; if everything relevant is detailed in there don’t come crying if the issue has problems, this isn’t a shop where, if you keep the bag and receipt, you can get a refund!
ULTIMATELY, INVESTORS MUST TAKE RESPONSIBILITY FOR THEIR OWN ACTIONS, CAVEAT EMPTOR
So what’s the answer to the question in the heading? From a high of 111 in November 2016, the bond recently dipped to a low of 85.5 on Star Wars Day – May the fourth – on reports of reporting irregularities and speculation on Wasps’ ability to service its debt (Sting in the tale?.......)
So, at the risk of being accused of fudging the issue,
I’m going to leave it hanging as a very personal choice; if you invested as a diehard fan and don’t believe that Wasps’ will be the first default in the history of ORB, then you may be comfortable to hang on in there taking what is a relatively generous coupon compared with more recent issues.
However, if you believe that the rather hairy stories
that have appeared in the Coventry Telegraph, or on the back pages of many of the nationals, means that the club faces an existential threat, you may think that the ninety two-and-a-quarter bid price that the bond clawed its way back to on its most recent day of trading represents an exit price that allows you to exit with dignity, having banked some decent coupons along the way.
27 DIY Investor Magazine | Jun 2018