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Billionaires' investments go bad

Last Updated: Monday, 14 July 2008

By James Thomson

The well-off can be caught by sharemarket shenanigans as much as the rest of us – but at least they have something to fall back on.

Shares in Harvey Norman have fallen almost 43% since the start of the year, wiping a massive $1.2 billion from the value of his holding. If that wasn’t bad enough, now some of Gerry’s sharemarket dabbles are turning into dogs.

Harvey was one of the cornerstone investors in electronic payment firm Bill Express, which entered voluntary administration this week after collapsing with $180 million of debts.

Harvey took a $12 million stake in the company when it floated in late 2004, but the stock quickly sunk below its issue price and never recovered, despite the fact the company posted a profit every year it was in operation. Harvey’s investment is now worth nothing.

Worse still, Harvey is also a large shareholder in another listed company On Q, which owned a large stake in Bill Express and has also emerged as a major creditor to the company. Back in 2004 when On Q shares reached their peak, Harvey’s stake was worth around $8.5 million. The shares, which are now suspended as the directors review the company’s seemingly perilous position, are now worth just $560,000.

Trucking magnate Lindsay Fox also has a stake in On Q, having bought into the company last year at around 20c, only to see the stock fall to 7.2c.

Of course, these little losses are unlikely to cause billionaires like Harvey or Fox to lose much sleep. As veteran investors who have pumped money into everything from horse racing auction companies (Harvey) to luxury car dealerships (Fox), they understand that investors win some and lose plenty.

But in the last five years, playing the sharemarket has been a great money-spinner for many of Australia’s wealthiest entrepreneurs. Those days appear to be over. With the bears now firmly in control, the markets are becoming a dangerous place to be, and Harvey and Fox are not the only rich investors to have taken a bath.

As well as his big shareholdings in Crown and Consolidated Media, James Packer has small stakes in property developer Sunland, Challenger Financial Services Group, oil and gas concern Energy World Corporation, uranium explorer Wildhorse Energy and investment fund Magellan Flagship Fund. As the table below indicates, 2008 has not been Packer’s best year. His loss on this portfolio totals $437 million.

Kevin Seymour has made a packet from his extensive investment portfolio in recent years, thanks particularly to his investments in gaming giant Tattersall’s, Macarthur Coal and Queensland engineering firm Ausenco.

Indeed, Seymour had plans to launch a funds management business for high-net worth individuals, but was forced to shelve them after the market started tanking late last year. Here’s a snapshot of three of his larger shareholdings, which have shed $137 million since the start of the year.

Cardboard king Richard Pratt has plenty on his plate at the moment, but that isn’t stopping his investment vehicle Thorney Holdings trading in a wide variety of stocks. The investment vehicle, run by Pratt’s son-in-law Alex Waislitz, is such an active trader that tracking the value of its holdings since the start of the year is impossible.

Instead, let’s take a look at a sample of 10 companies in which Thorney has purchased shares in the last 12 months.

It’s an eclectic mix of companies but they do have one thing in common – their share prices have been in free-fall since the start of the year, falling by an average of 50%. That said, the holdings are relatively small and any losses are not going to put much of a dent in Pratt’s $5.5 billion fortune. If anything, Thorney Holdings may use the bear market as an opportunity to scoop up some bargains.

Read more on Gerry Harvey, Lindsay Fox, James Packer, Richard Pratt