Monday, 25 November 2013

"all the IPOs this year were making money for investors", really?

Article from the website of The Star: "At least 9 IPOs worth RM18.14bil for 2014".

First of all a list of nine big IPO's in 2014. I have been sceptical about big IPO's, I think Bursa has been pushing this too much, it really should not be a target on itself. The target should be to bring good quality Malaysian companies to Bursa, at a reasonable price, leaving some money on the table for retail investors who might be willing to take the risk.

On the list:
  • Two Iskandar developers, I am scared all the clever money has been made already, and the property market is way too hot and might already be cooling;
  • 1MDB (floating its energy assets), I am critical of 1MDB due to the lack of transparency;
  • Malakoff and IOI Properties, both playing the listing-delisting-relisting "game";
  • 7-Eleven, the listing possibly will not go through, according to an article in The Edge today.
Further, the article mentions:

"Besides these IPOs, there is likely to be another group of companies coming to the market under the guidelines for special purpose acquisition companies, or SPACs, and business trusts."

I am highly sceptical of SPACs, and business trusts have performed badly (on average) in Singapore.

In other words, I am not very positive about the announced plans for future IPO's in Malaysia.

The article continues:

"RHB Investment Bank Bhd director and regional head of equity capital markets Gan Kim Khoon recently said that investors should ride on the wave of Malaysia’s IPO market, but only after doing their homework on the new entrants.

He noted that all the IPOs this year were making money for investors and said this trend was likely to continue next year, when speaking at a recent panel discussion on the prospects for next year’s equity market."

All the IPO's this year making money for investors? Surely that can't be true:


Further more statements like "investors should ride on the wave of Malaysia’s IPO market" and "this trend was likely to continue next year", I find those pretty dangerous statements given the high valuations and the bubble like conditions worldwide.

I have never bought a share for long-term investment at IPO price, the risk is pretty high: [1] often there is a lot of hot air injected in the company and [2] the quality of the audits is not up to the standard compared to when the company is properly listed.

I normally wait for at least two full years of audited results before I even consider investing in a listed company. Although I must have missed a few nice gains, I definitely also missed lots of misery.

I do agree though with the following statement: "but only after doing their homework on the new entrants".

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