Initial Public Offerings are also known as IPO’s or floats.
An IPO is when a company goes to the market to raise money. They do this for a number of different reasons including to fund expansion or sell part of their company. This is your chance to get in on the ground floor as normally once the company lists on market the price will rise.
Getting in on the initial float is the best way to maximize your profits; this is due to the promoters offering the shares below fair value to provide an incentive for investors to buy. The question is how do you get in on the ground floor?
Simple, be a preferred client of a broker who deals in floats. Any good float is always heavily over subscribed, the only way to ensure that you get some, is to be allocated firm stock from your broker. Brokers will only hand out this stock to their best clients, this is how they reward their clients for the loyalty shown over many years.
1. If you do not have a close relationship with a broker and they call you and offer you stock, be careful as demand for the stock is most likely low and the price might drop on open.
2. If you get stock through a discount broker, see above.
3. Not all IPO’s are good ones, in the last year of the Bull market over 90% of the IPO opened below the issue price. A good broker will avoid these IPO for you.
Right now is a great time to be involved in IPO’s, during a Bear market brokers know that only the good IPO’s will be taken up as such they will only float the best companies.
Over the next couple of years we will see some fantastic IPO’s come to the market place.
Now is the time to make sure your broker is thinking of you.
PS. Need more information on IPO's? Give us a call at ABN AMRO Morgans Townsville, 07 4771 4577 we are always ready to listen, explain and help.