Buying IPO's?

Discussion in 'Shares & Funds' started by Cmelderis, 21st May, 2020.

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  1. Cmelderis

    Cmelderis Well-Known Member

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    Hi All,
    Talking with a friend recently and comes up in the convo that her husband is involved in a new Marijuana facility starting up in WA. I mentioned that I had been interested in buying some shares in such a company and she is sending me details
    I am overall looking at going down the LIC/ETF route but open to investing a small amount into something that I could turn over and give me a nice profit in a relatively small amount of time
    The project is $180m so clearly someone has belief and is fronting this money
    Apart from the obvious risk factor involved what are some other things I should be aware of? I am only investing a small amount that I am prepared to lose.
    The plan is to float in Feb 2021
    Looks like my buy in price will be a quarter of what they are proposing it will float for ( 5c now 20c when first floats ) what is the typical initial trajectory of share price when first listed?
    Any input welcome :)
     
  2. Codie

    Codie Well-Known Member

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    Do they need some more investors at 5c a share? :)
     
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  3. Blueskies

    Blueskies Well-Known Member

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    Most IPOs are like jailhouse sex. What you want you cant get, and what you get you dont want.

    Seriously though i cant remember the stats but I know than mkre than 50% of companies are worth less both short term and 1 year on from an IPO.
     
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  4. Cmelderis

    Cmelderis Well-Known Member

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    Less than the price they first float at? I would be buying these now at 5c and the plan is it for float at 20c in Feb 2021....thanks for your reply I agree that it can indeed end badly hence I will only invest what I am prepared to lose
     
  5. Cmelderis

    Cmelderis Well-Known Member

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    I can certainly ask the question
     
  6. Blueskies

    Blueskies Well-Known Member

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    Apologies, I missed the detail of your post. So you are providing venture capital buying shares in the company unlisted, and then selling when they float correct?

    If it were me (and I have no idea, just spitballing) I would want to have a really thorough look over their historical financials (independently audited) and business plan before giving them any money. Also how can you be sure of their float price, date and how can you be sure they wont issue more shares and dilute your stake?
     
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  7. willair

    willair Well-Known Member Premium Member

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    I have bought into several of these one listed at 20cents went back to 15 cents then over 9 months went just below $1-90,and looking at the way the original convertible securities works over time as that holding is now just below 6-7 cents ..But i have never invested in the pre-listing stage as from memory as the entry-cost -risk was just too much as it only works 2 ways it pay off big time or you end up with zero ..So consider the information you obtain very carefully before investing your money..imho..
     
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  8. Cmelderis

    Cmelderis Well-Known Member

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    All very valid points, thank you