It’s not something that people get from a sneezing commuter, but probably just as virulent, if not more. And if you talk to players in the stock market, they’ll say a lot of equities investors are already capitulating to it.
I’m talking about the bug that’s currently causing an IPO fever among equities investors. This year’s IPO fever seems to be growing more intense as an increasing number of companies turn to the stock market to raise funds and as more investors get bored with low returns of fixed-income instruments. Or in some cases, things like time deposit.
I wrote about this earlier today (read the article here) and was I relieved to find that at the senior management level, the exuberance about IPOs was a bit tempered and more palatable – at least to me.
I like how Jenny F. Ting Jr., senior manager at BPI Asset Management, in fact discouraged flippers – those who buy IPO shares only to unload in a few days so they can ride the initial run-up in prices. Definitely, this is not the kind of advice you will hear from brokers.
“Don’t buy blindly. Get a prospectus and read it. Analyze the company, the industry where it belongs, and compare it with its competitors,” Ting said.
Buy into an IPO not because it’s hot, but because you think the company is a good one and that it’s priced fairly. In fact, that’s a value investor’s reason for buying any stock — IPO or not.
Companies that have announced plans to hold an IPO include Northwind Power Development Co., which operates a wind farm in the northern province of Ilocos Norte; ethanol fuel producer San Carlos Bionenergy Inc., based in Negros Occidental province; PNOC Alternative Fuels Corp., a biofuel unit of state-owned Philippine National Oil Co.; and Enerfuse Holdings Inc., also a biofuel producer, Davao-based oil firm Phoenix Petroleum Philippines Inc., high-rise housing developer Anchor Land Holdings Inc., McDonald’s master franchise holder Golden Arches, Asia Brewery, Cebu Pacific in 2009 and Aboitiz Power Corp., a unit of Aboitiz Equity.
National Reinsurance Corp. of the Philippines, which will hold its market debut tomorrow, has a P3.80 per share initial price offering. PCCI Securities Brokers Corp. president Francisco M. Liboro said National Re would likely hit its ceiling price of P5.70 on Friday. “National Re is a good company to include in one’s portfolio. It’s not exciting, it’s an insurance company, but it has good prospects,” he said at the Good News Kapihan this morning.
Demand for the stock was high enough that there has already been over the counter trading at P5 per share. In OTC trading, the shares trade hands on an honesty-based system where your shares are bought in someone else’s name. Let’s say I’m a broker and I have an allocation of P200,000 but I don’t have money. You can buy those shares but they will be bought in my name. A seasoned investor told me OTC trading is tricky, but it could work if you really trust your broker.
If you bought half a million National Re shares at P3.80, your P1.9 million will grow to P2.85 million in a single trading day. Pretty good, huh. But let’s say 60 percent of those who bought National Re unload the shares tomorrow or Monday, what will happen to the stock price? Flippers can, in fact, cause a perfectly good IPO to turn into a dud.
Some think IPOs are for first-timers. Nothing can be further from the truth. In fact, in most advanced markets, a good broker would most likely think twice about selling to someone they don’t know. Brokers save their IPOs for favored clients. If they start pushing IPOs to anybody they ran across, I would be suspicious. That might mean you are getting stocks the “favored clients” didn’t like.
It would be best to pick a strong broker, establish a working relationship with him, and look for someone who takes the time to understand your risk tolerance. When its time to choose which IPO to invest in, don’t drag your feet in poring over the prospectus. That’s where the information on a company’s financial status is disclosed. Find out where they are going to use the proceeds of the IPO. Investopedia.com says it is a bad sign if a company will use the IPO to pay their loans. If the money is intended for marketing, expanding to other markets, or research and development, that shows a much better prospect for the company.
But don’t put your faith in the prospectus alone. Do your own research. Study the management. Make sure you read the accounting figures well because naturally, there’s risk the company will be too bullish with their forecast. The problem with an IPO is that information on the company is hard to get, compared with companies that are already listed and open to anyone’s scrutiny.
There is money to be made in IPOs, but approach them with a healthy dose of skepticism and a willingness to do the extra work of understanding the company behind them. This IPO fever can end this year or last for many more years until, as Liboro says, the next flop happens.
July 3rd, 2007 at 11:27 pm
Hello! Good Site! Thanks you! sjdhdefeclaruh
May 10th, 2007 at 9:49 pm
it depends on your online broker. usually they send email notification if you wish to avail of the IPO. but i guess their allocations may not be evenly-distributed to clients.
May 10th, 2007 at 3:05 pm
if IPOs is for favored clients, that means there’s no way for a newbie like me to get an IPO? and what if you’re an online trader does this means that you cannot get hold of an IPO? Thanks
May 7th, 2007 at 3:19 pm
i thought so too.
thanks for the confirm!
May 7th, 2007 at 11:50 am
i seem to have read in some other forum that he send his newsletters to selected subscribers who pays a subscription fee. i think it was P2000/ month? not sure…
May 7th, 2007 at 8:48 am
hi tee, Ron Nathan’s newsletter is exclusively for his subscribers, that is why you can’t get it off the web.
May 6th, 2007 at 11:04 pm
regarding the Mr. Bearbull column..
i read his articles in inquirer regularly. but he sometimes mentions a newsletter he writes, i believe about his stock market research & analysis? Tsupitero.com also mentions it in his ron nathan interview. I searched the net and didnt come up with anything.
does anybody know where his newsletter is published?
May 6th, 2007 at 4:55 pm
Hi Cheryl,
Thanks for the tip. At least I have some options to look at. Actually, there were too many online, but I just simply wanted to protect my hard earned cash and make some more… if possible.
BTW, I would like to commend both Inquirer and Salve for providing a flatform of worthy cause by guiding Pinoys how and where to put their money; which our government and TRAPOS could not afford to do so.
More power to both Inquirer and Salve. May you continuously be a catalyst for instituting changes the way people (especially Pinoys) handles their own money in order to achieve financial breakthrough.
Mabuhay po kayo!
May 6th, 2007 at 4:35 am
Hi Erik,
I am also living abroad, and I trade online with RCBC Securities - RCBC eztrade. I just applied online and didn’t have to be there personally. What they required me to do is just submit some documents which is notarized by the Phil. consulate in wherever place you are in. Here’s their website: http://www.rcbcsec.com/
Good luck and happy trading. You may also read Mr. Bearbull by Ron Nathan in the Inquirer as he writes on stock picks and lots of laughs.
May 5th, 2007 at 7:53 am
hey angel and melvin
many thanks for the tip. it was much appreciated.
May 4th, 2007 at 7:27 am
Erik,
You can also visit http://www.citiseconline.com, an online broker. They offer a free 7-day trial.
May 4th, 2007 at 1:24 am
hi erik, yes there is an online trading offered by philstocks, . you won’t need to have an appearance personally all you need to do is send them the required documents needed and viola !you can fund your account anytime through their EPCI account once it was approved. well it works for me im also an ofw. their customer service representives are very accomodating. hey, philstocks did not paid me for advertisement ha..
May 1st, 2007 at 4:34 pm
Is there any online real-time e-trading available from Philippines? I’ve check PSI’s website but it require online registration aside from personal appearance at the PSI office in Manila. Am living abroad for almost 2 decades now.
I would apprecaite if you could refer some trusted e-trading site please!
April 29th, 2007 at 3:12 pm
hi bizwiz, thanks for dropping by.
hi gail, as a neophyte it is absolutely important for you to first, make sure that you are not in debt, that you have three to six months’ worth of emergency fund, if you are married and have children or if your parents are depending on you for their upkeep to be appropriately insured.
if you are interested in investing in stocks, you need to understand totally the risks and rewards of such an investment. There is a wealth of information in INQUIRER.net’s business pages, specifically the personal finance and advice section. Here are the links:
http://business.inquirer.net/money/personalfinance
http://business.inquirer.net/money/advice
Read, read, read if you are serious about it because the rewards may be great, but the risks will be too — so go with something that will not make you lose sleep at night. Some put their money in mutual funds to get a feel of what it could be like to have some money invested in stocks — but again, although mutual funds may give you professional management and instant diversification for a smaller amount of money, but that doesn’t mean you just entrust your money to the fund manager and expect him to make you rich. You still need to know the risks and the ins and outs of mutual fund investing. Having said that, i’m glad that you’re thinking of your financial future. Good luck!
April 28th, 2007 at 4:04 am
i’m interested to join the stock market, as a neophyte what shall i do. this article is quite convincing.please send me info’s thanks
April 26th, 2007 at 10:13 pm
The trick for an average investor is getting more than the minimum lot assigned by brokers which as you have said is reserved to their valued clients. But even with the minimum lot you can still earn some money from it.