There are various reasons for companies going public. One of them, is to make the company more transparent because its shared owned also by the public. There is also a wish to look for cheap funds from the public for business development, expansion, or payment of debt. Well, happy hunting prime stock, usually much scattered in the beginning of year! But remember, you must remain to be careful in the using of your capital, just try with stock pick and more in detail information about small cap stocks to make an experiment.
Fortune that can be achieved
First, profits from capital gains or changes of the stock price . Second, allocation of dividend or part of its net profit in every year.
Tips to buy IPO :
Each company will publish a short prospectus in several national newspapers before the IPO. It contained about the company history, the purpose of the IPO, the use of proceeds from the IPO, and the company’s financial reports for three years. From this prospectus, can be found the track record and prospects of the company.
2. Not for paying debt
Instead, do not buy shares in a company that will use the IPO proceeds to repay their debt. Choose a company that use the money to finance business expansion plan. So our money can grow.
3. Who is its “wedding organizer”?
Find the underwriter of the company going public. The task of underwriter is similar with wedding organizer, which is handling all affairs from the beginning of the IPO until the shares are listed on the stock.
4. Dissect the contents of the company
Before the IPO, company must hold a public exposure. This celebration is similar to the press conference which is an excellent opportunity to dissect the contents of the company. Ask to the underwriter when the event will be held.
5. Start ordering
After the public exposure, the company – helped by underwriter – usually holds the bidding period. That’s the period when you can buy shares. The Booking and purchase of the shares direct to the underwriter and seller agents that have been appointed (co-underwriters). But not necessarily you will get all the shares that you’ve ordered. Moreover, if the shares sold well and experiencing excess of demand or oversubscribed. Dont be afraid if you haven’t enough capital, because you still can buy with penny stocks.
6. Cost Estimation
Estimate the price of IPO: expensive or cheap. High price is not necessarily expensive. Conversely, low prices are not always cheap. One of the formulas is: the ratio of stock price divided by net earnings of the company or called as PER (price to earnings ratio). Compare the ratio obtained with the other companies who had already signed firstly in the stock.
7. Get a discount
Usually, companies and underwriters always give a discount price at the IPO.
8. Selling when it rises
Almost all the IPO shares on the Stock Exchange print the stock price increase on the first day of trading in the secondary market. If you belong to the type of aggressive investors who want to reap a lot of profits so, when buying IPO shares in the primary market, just sell the stock when it was “in action” on the secondary market.
9. Or just save it
If you include to this class of conservative investors and have a long-term investment horizon, please continue to keep the IPO shares for years. Nothing to lose adaro shares, for example, the price has gone up to 100 percent in just two years.