Shedding light on IPOs

[mech81]

Hi guys,

I have been trawling through this forum and the amount of knowledge has been amazing. I'm about to start getting my feet wet and have been looking closely at the Myers IPO but have not made the decision to go in just yet. This question is more about IPOs in general. What do I have to do prior to an IPO

I understand that I have to apply for an IPO first. And (correct me if I'm wrong) I have to get a broker as I do not have one (planning to go with interactive brokers? What happens thereafter if I become successful in being allocated shares? How does one know about upcoming IPOs or new market capitalisation (not sure if this is the correct term)?

Thanks for the help in advance

 

[Sir Osisofliver]

Mech81.

ASX has a list of forthcoming IPO's and the lead managers displayed upon their website.

www.asx.com.au

Once listed any future capital raising that a company does is disclosed to the market. Your platform will have that information or once again it is available at the ASX website.

When looking at a new IPO you have no Technical Information on which to base your investment decision. Therefore the only type of analysis that can be done is Fundamental analysis, both Quantitative and Qualitative.

Quantitative analysis is using numbers
Qualitative numbers is more subjective and tries to place a value on intangibles such as goodwill, quality of management, industry type and other intangible features.

There is a thread on the Myer float on these boards...I suggest you go look at it.

Cheers

Sir O

 

[mech81]

Hi Sir Osisofliver,

Thanks for your post/reply. Really helpful with the info there. Just the one question, so if I am to be allocated shares, I would have to subscribe to a stockmarket broker? Sorry if its a stupid question

thanks

 

[Rainmaker2000]

Hi mech81.......not such a silly question.....

You will be allocated shares without a brokerage transaction.........they will thus be 'issue sponsored' shares for share registry purposes.........

The issue will be selling them on market which requires a broker.......some online brokers allow for a sale even for people who are not brokerage clients..

Of course, you will want to become a client some time........at which case, the shares will change from 'issuer sponsored' to being sponsored by your broker for share registration purposes............

So other than saying that MYER is terribly, terribly overpriced.........even DJs is way over priced but at least they are not swimming in debt and have real assets like their Melbourne buildings......hehe....but enough said

 

[Sir Osisofliver]

Hi Sir Osisofliver,

Thanks for your post/reply. Really helpful with the info there. Just the one question, so if I am to be allocated shares, I would have to subscribe to a stockmarket broker? Sorry if its a stupid question

thanks

Mech - There are no stupid questions...except when you are drunk. You previously said that you were planning to use IB - these are your brokers who will provide you with a HIN (Holder Identification Number).

During IPO's there are several different types of stock each with different priority from the pool of shares available. The order is as follows: -

1) Managing Director List - Generally this is a private investor list controlled by the CEO and Managing Director and is a small pool of shares that is carved from the main pool. It is quite common and the Managing Director uses this pool to reward particular individuals who may have helped the company in the past.

2) Institutional Allocation - By far generally the largest portion of the allocation is once against carved from the allocation pool before Joe Public gets a look in.

3) Broker Firm stock (divided into Lead Manager and Joint manager and Other broker portions). If you wish to get access to this pool you should ring your broker and ask whether they will have access to participate. (It is up to the lead manager to give them an allocation of shares).

4) If your broker does not get access to the IPO, the only only option that you have is if the Lead Manager offers Shares to Retail Investors without the intervention of a Broker. (Issuer Sponsored Offering). This occurs generally where the offering is a) Particularly LARGE and no broker or group of brokers will be able to sell it in it's entirity to it's own client base OR b) It's rubbish and no brokers want to foist it off on their clients just to get a commission.

Hope that helps

Cheers

Sir O

 

[mech81]

Thanks rainmaker and OsisofLiver,
Tremendous help on the info that you both gave. I now understand the process. Have a good day guys