Rules of thumb for IPOs?

[ghotib]

Just wondering if people have any general guidelines for putting money into an IPO. Or not.

The one that's got me thinking is Papyrus Australia ( http://www.papyrusaustralia.com.au/ ) I first heard of the technology through the Landline programme some 18 months or so ago, and I've been keeping a vague eye on it ever since.

My rule of thumb for IPOs is run away. And in a bull market, I guess it should be run faster. And I know know know that a good product is not enough for a good investment. But I just LIKE this one.... and that's even more reason to stay out, right?

I've downloaded a prospectus and I've starting reading it, highlighter in hand and calculator at side.

Any comments on IPOs in general, or this one in particular?

Ghoti (the indecisive)

 

[Fleeta]

There is always the option of jumping on the day after it lists, which would be good if it lists at a discount.

The free option is always a good reason to jump in at IPO - especially given it is exercisable up to 2008!

However, this one got delayed didn't it...isn't that a bad sign. Do you know what happened? Maybe they had trouble with the take-up of the offer?

 

[ghotib]

There is always the option of jumping on the day after it lists, which would be good if it lists at a discount.

The free option is always a good reason to jump in at IPO - especially given it is exercisable up to 2008!

However, this one got delayed didn't it...isn't that a bad sign. Do you know what happened? Maybe they had trouble with the take-up of the offer?

Missed your reply Fleeta - sorry about the delay.

Yes it is delayed and I also thought that's probably not a good sign, though the website says the reasons are delays in printing the prospectus and the number of small investors.

Interested in your remark about the free option. My first experience with free options was employee stock options in a company whose listing failed and which then went bust (well the owners managed to sell the shell and I guess got something for their efforts, but it stopped producing its own products). Turned me off the whole idea a bit, though obviously it works well for a lot of executives

The sensible, conservative thing to do with this one is wait and see. It's a speccie; it even says it's a speccie, and we blew our speccie funds last night on a Lotto ticket.

Of course, it takes longer to do your dough on a speccie IPO than on a Lotto ticket...

<sigh>

Ghoti

 

[Smurf1976]

Yes it is delayed and I also thought that's probably not a good sign, though the website says the reasons are delays in printing the prospectus and the number of small investors.

I know nothing about this company but the "reason" for the delay sounds a bit like that naughty dog that eats every kid's homework. It might be legit, the printing company could have had technical problems or some office temp specified the wrong delivery date, but given the way the market has performed over the past couple of days I think you ought to be pretty careful.

Does your broker take start gain orders? If they do then you could place a start gain order above the listing price in case it takes off on the first day and then assess the situation that night.

Just my opinion which could be totally wrong.

 

[Fleeta]

Even if the reasons for the delay are legitimate, I would still think that it will not close over-subscribed, which means there will be an overhang of stock, which means that it will list at a discount.

Looks like great technology, and certainly a growth industry, but you have to question whether in the current climate and its current position, 20c is a maintainable price.

Another interesting thing to note in IPOs is how much of the ownership is retained by the current owners (in this case it is more than half) and how long a period the securities are in escow (i.e. the original owners can't sell out in the first x years). I think the fact that they are not flogging off the whole company is a good thing.

Weighing it all up, I would certainly wait and watch cos I can't see it taking off on day 1. Just my opinion.

 

[Fleeta]

Hey Ghotib, bet you are glad you didn't waste your hard earned on PPY - down to 12c and the options look worthless at the moment.

I've been watching since day 1 and actually put it in the May comp where it was going Ok for a bit.

I'll still watch and if the maiden results are OK, it could be worth jumping on...not sure if the share price drop is lack of interest or lack of prospects, its always hard to tell with an IPO.

 

[ghotib]

Yes I think I'll treat it as a Terrible Warning and stay away from IPOs, unless I'm doing the offering. As a faithful follower of Buffet I should do that anyway.

I don't know of any reason for share price movement unless it has something to do with murmurings about a technology for using bananas to run motor vehicles, and "investors" thought PPY might have a shortage of supply.

Like you, I"ll keep an eye out for results and announcements. I do wish them well.

Cheers,

Ghoti

 

[doctorj]

I don't have the statistics at hand, but I have a paper around here somewhere that discusses the pricing of issues and how on average, they are statistically under priced on issue. The paper was based on research carried out in both Australian and US markets. It also made the comment that statistically, Australian IPOs were underpriced by a greater margin than US IPOs. Probably has something to do with the greater volitility of our markets and our weighting to resources IPOs which tend to be even more volitile.

Food for thought.

 

[ghotib]

Hi Doc,

Can you lay your hands on that paper fairly easily? I'd be interested to know more.

Thanks,

Ghoti

 

[yogi-in-oz]

Hi folks,

IPOs present some real challenges to many analysts,
not least, is how to anticipate market turns in the
early history of any listed entity.

Of course, if we were paid the big bucks, like blodgett
and his cronies, we could just invent some rubbish
and feed it to the unsuspecting masses.

Real traders however, often need to evaluate markets,
with only limited technical data available .....

..... a typical example being an IPO.

Fortunately, with Gann's astrotrading tools, we can look
ahead from listing of the entity and make some fairly
accurate assumptions about market news/moves, on
particular key dates.

Here's a few current examples:

Goodman Fielder - GFF - lists 19122005

27-28122005 ..... minor and negative

Throughout the whole of January 2006 there's an
underlying tone of negativity for GFF, so any positive
cycles may record a muted response in the price.

06-09012006 ..... significant and positive

13-16012006 ..... significant and positive news

17-18012006 ..... significant and positive???

20-27012006 ..... BIG time negative .... most likely the
worst for 2006 ... !~!

..... negative cycles continue, in early February 2006.

======

In stark contrast:

Tutt Bryant - TBG - lists 15122005

20122005 ..... minor and negative

22122005 ..... minor and positive

27122005 ..... minor news

06-09012006 ..... minor and positive

13-16012006 ..... minor and positive news

20-23012006 ..... significant and negative

25-27012006 ..... positive ..... finance-related???

Early February 2006 may be choppy, with an underlying
negative tone throughout the month.

02022006 ..... significant and negative news???

06022006 ..... BIG news ..... some conflict here???

10-13022006 ..... minor and positive ..... finances???

20-022006 ..... positive news???


=====

SP Ausnet - SPN - lists 14122005

15122005 ..... minor and negative

16-19122005 ..... significant and negative

28122005 ..... minor and positive

January 2006 has an underlying negative tone for SPN.

02012006 ..... negative news ???

11012006 ..... positive ..... finance-related

16012006 ..... significant and positive

20012006 ..... significant and positive news???

06022006 ..... minor

08-09022006 ..... significant and positive

14022006 ..... minor changes

27022006 ..... 2 cycles here ... significant financial news???


=====

Spark Infrastructure - SKI - lists 16122005

Some long periods of flat trading ahead for this stock,
in December 2005 and January 2006 and June 2006.

Watch key dates and price action, similar to HDR .....

=====


So, instead of flying blind into a stag selloff, on the
next hot ipo ... maybe some of Gann's astroanalysis
will help some traders survive the shakeout, by exiting
before the onslaught ..... yes ... ???

happy days

yogi

P.S. .... with only limited data from the listing details, any
IPO or stock with limited data (for whatever reason)
may be readily analyzed for future key dates .....