I started playing IPOs during my university days and on the day i turn 21, i went to the brokerage firm to open an account. It was more tedious back then. Need to first open a CDP account then to your brokerage firm.
During this period, I had my fair share of lessons, paid the school fees for the wrong picks but reaping the rewards when lady luck shines on me with a "$1"bet. When i was much younger, i even had 4 accounts just to play "tikam" at the ATM machines.... .
My 'worst' ever IPO loss was in March last year when the tsunami hit and i was allocated a lot of Hutchinson Port Shares by the underwriting bank and from the ATM machine. It was a combination of bad luck because you have to indicate your orders very early on for placement shares (way before the Tsunami struck), and when the company and underwriter decided to proceed, you know you are being "screwed" (pardon my language) as they unload whatever shares you have indicated on you. Similarly for the ATM tranche, you get what you applied for! In addition, a weakening USD against SGD meant i had a triple whammy.
I was allocated 87 lots from both the placement and public tranche and you know that's it! Look at the share price performance above. The thing about me is when i know i have made a mistake, i cut my losses and move on. I cut my losses within the first week and realised a 5 figure loss. Imagine if i had not done that, my losses will be 5x of it when share price dropped 50%.
Lesson 1 - Don't ever think the underwriter or broker is on your side.
When times are good, they give you 5 lots when you indicate 50 lots. When times are bad, they give you 50 lots and ask if you want some more. You should be concerned if your broker suddenly asked if you want placement shares one day if he doesn't have that habit of asking you. Similarly for the ATM, they give you a pathetic few lots when the IPO is hot. I am quite glad that SGX is looking at way to increase the retail tranche for IPOs that are hot. Its time they do something!
Lesson 2 - Pay the school fees and move on
When you know you have made a mistake either due to bad luck or analysis, pay the school fees and move on. Don't hope the share price will come back up above water.
Lesson 3 - Always be wary of IPO companies.
You may find it contradicting when i asked you to be wary. The reason is because i have seen too many tricks that companies and underwriters do to boost the IPO valuation. The whole reason why Companies issue prospectus in the first place is to cover their backside. They list out tons of risk factors and assumptions such that you cannot sue them if the companies failed to perform after listing because you are expected to read the prospectus and the risk factors listed in it! Why do you think listing prospectus are getting thicker and thicker such that you can carry weights with them. They are also basically useless because they do not tell you about future projections and profit estimates. The reasons why they play tricks is because they will want to report the most profits in the year prior to listing so that they can achieve the highest IPO valuation. Some of the common tricks will be to defer prior year sale into current year to show an increasing profit trend for listing or not recognising or capitalizing the expenses incurred etc etc! There are 101 tricks to help boost profits, so always read prospectus with a huge pinch of salt.
For many such reasons, i usually will not consider IPOs for long term investments as I need them to prove to me their credibility and track record. As you can see, many Chinese IPOs in Singapore flunk post listing because the accounting holes are getting too big to cover over time!
Lesson 4 - IPOs depend a lot on sentiments and institutional demand
IPOs depend greatly on sentiments. Hence you can see why there is a drought of IPOs this year until July. Where visits to my blog suddenly revived as well. So be aware as sentiments can quickly turn sour!
Lesson 5 - Keep a good records of all your investments.
If you want to be a serious investor or trading, it is essential you starting keeping a good records.
Ok so much for now. My IPO performances this year as promised net of fees and expenses. Not really a lot. $3,223. A 4-D number for you perhaps? hahaha. Happy IPOing.
|2012 IPOs todate|