Monday, June 25, 2007

The deal with IPOs

I read a friend's blog some time a few days ago, and she was mentioning someone asking her to invest in IPOs. Currently, it seems that IPOs are gold in Singapore, and we saw two recent IPO launches hit the jackpot recently.

CHINA XLX FERTILISER LTD.
Offer price = S$0.77
1st day closing price = $1.20
Premium = 55.8%

COSMOSTEEL HOLDINGS LIMITED
Offer price = S$0.26
1st day closing price = $0.69
Premium = 165.4%


There you go! What easy money eh? Haha, that's what I thought too initially. Let's say I buy 20 lots, i.e. 20000 shares, of Cosmosteel:

Initial capital = 20,000 x $0.26 = $5200
Sell on 1st day = 20,000 x $0.69 = $13800
Profit = $8600!!!

Whoa! I thought, instant riches! Haha, if that's what you think you can do with IPOs, and plan to sink $20,000 into them to turn into $50,000 in one day, take a look at this.





Take a look at the IPOs' shares offered to the PUBLIC. 6,000 lots for XLX and 1,000 lots for Cosmosteel. The rest of the millions of shares? Sold to institutional and high-networth individuals (read: millionaires...) Yes, so for the average singaporean, you are fighting about another 30,000 investors for 1,000 lots or so. How many will you get? You have a better chance of queing up for Hello Kitty dolls at Macs or for donuts at Donut Factory during peak hour. Lucky people may get one or two lots. So that's how the rich get richer. They get all these sort of preferential treatment. Haiz.. poor students like us? Try for IPOs, but don't bank your profits on them. =)




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