IPO - How to Buy Them?

knowwhat on 15/08/2021 - 21:14

Hi Ozbargainers,

I am interested to look into upcoming IPO's and was interested to know what are the best options to know about them before they are filled out and miss them?
I have been using CMC markets trading platform for buying shares and have subscribed to Team@onMarket, but have been a bit disappointed as most of the time, the IPO orders have already been filled, by the time the notifications has arrived.

  1. Any platforms/apps to know about upcoming IPO's (Aus and USA)?
  2. How does one assess the IPO's performance and decide if it is worth investing? What does one look for? Is there framework? Any tips would be highly appreciated?

Thanks for sharing your thoughts and knowledge in this space.

Financial

Comments

  • elgrande on 15/08/2021 - 21:35
    -3

    You want to own Elvis?

  • mskeggs on 15/08/2021 - 22:11
    +5

    Access to desirable IPOs is managed by the brokers underwriting the offer.
    If you have an account with them, and are a desirable customer, they will consider giving you access.

    In my experience, to be a desirable client, you will need to be putting lots of trades, or very large trades regularly via their platform.
    Some brokers will play the game of offering you shares in the desirable IPOs if you take shares in undesirable ones.

    To get any meaningful access you need a lot of money and a relationship with your broker. I used to know people in the Macquarie Bank full service broking team, and they would have little interest in talking to you about any IPO unless you could contribute $10000s, so they can sell the less desirable ones.

    • mskeggs on 15/08/2021 - 22:20
      -1

      And it wasn’t always financially sensible. A lot of wealthy people are happy to lose more cash on dud IPOs than they make on the good ones, just so they can have bragging rights that they were invested in the hot new thing.

      • sangohan on 29/12/2021 - 22:05

        That's not true - it's more that they're taking a position in a lot of IPOs and hope for the one that gives them 1000x returns (to make up for the duds).

        • mskeggs on 29/12/2021 - 22:13
          +1

          Thanks for telling me about how this works.
          BTW, how many IPOs make 1000x returns on the first day? Why not buy on market, rather than having to buy all the duds?

          Or are you getting mixed up with venture capital?

          • sangohan on 30/12/2021 - 14:08

            @mskeggs: I'm talking about IPO returns after some years. Sure, there would be people only interested in selling the IPO pop, but i consider those people traders, and not (long term) investors.

            Consider someone who would've invested in the tesla IPO.

            • mskeggs on 30/12/2021 - 14:53
              +1

              @sangohan: So when you say my comment is not true, you are basing this on how you think Tesla IPO investors make their decisions?

              Did you participate in the Tesla IPO? If so, are you still holding?

            • rektrading on 30/12/2021 - 15:05
              +1

              @sangohan: Most IPO sell every time they hit 2x. They're retail and can't hodl a 🐻 market.

    • foxmulder on 15/08/2021 - 22:26

      Do you know how long the stock with the ipo is held by that particular broker before then available to other online brokers the like selfwealth?

      • mskeggs on 15/08/2021 - 23:02
        +8

        If, say, Goldman Sachs is underwriting the offer, they will first seek to sell it to their clients.
        If it is a popular offer, they will likely be able to sell it all to their clients.

        Because they also have to sell less popular offerings, they will try and keep some other brokers onside with them by allocating some of the popular offers to them too. If Selfwealth, or whoever, is able to regularly sell the junk offers to their own clients, they will get some crumbs of the good stuff too.

        There are no rules or regulations about this, it is purely about favours and mates. If you don't have relationships with underwriting brokers, you are back of the queue. If you regularly agree to buy junk IPOs, you can likely get access to some good ones too. But there are never enough popular shares on offer, and they go to favoured clients first, you will struggle to get access to popular IPOs.

        If you watch who underwrites market capital raises, you will see there are a small number of "first tier" underwriters. If you don't do business with them, you have little prospect of influencing them to give you access to popular IPOs.
        There is also a "second tier" bunch of brokers. These handle smaller IPOs, often ones that are less popular. Then there is the brokers who just run trading platforms and don't have any access to IPOs except what they convince the lead brokers to offer them.

        Both tiers of issuing brokers handle some junk. Their ability to find buyers for junk makes them desirable choices for a company going public to select them - the sellers want to sell all the new shares for as much as they can.
        The brokers take a fee (routinely even 10%) and if they can't sell all the stock they underwrite the offer - meaning they are on the hook to make up the difference. They obviously don't want to be left holding the junk, so they work hard to keep a bunch of buyers around.

        Since it is the board of directors who pick the underwriters, you sometimes see them handling junk because the chairman happens to also be on the board of another desirable company. This is the fundamental reason boards of directors are so incestuous - if you are on the board of Afterpay, and also Junkco, the brokers will agree to underwrite Junkco to curry favour for the next bit of business with Afterpay.

        Its game of mates all the way down.
        And since many of the people on both sides of the desk went to the same top private schools, there is a network of relationships that extend all the way back to childhood, or between generations.
        There are other networks too. With the weight of money coming out of China, there are brokers who work hard to develop relationships there, by employing relatives of influential Chinese businesspeople. And the top tier brokers have offices globally, with similar arrangements, so they are tapped in to similar networks in the US or UK etc.

        So probably the best way to guarantee access to IPOs is to have a wealthy father and grandfather who all went to Kings School, and have a few mates at the some of the big trading desks.
        Hope you planned this well, I didn't!

        • foxmulder on 15/08/2021 - 23:06
          -1

          I thank you for the detail explanation. Very insightful.

        • knowwhat on 18/08/2021 - 20:56

          Thanks for your comprehensive response.
          Atleast now, I can sleep peacefully as I know I cant do much about it.

  • rektrading on 15/08/2021 - 23:54

    IPOs are the transfer of money from retail noobs to VCs.

    "Buy the rumor, sell the news". CRW will go back to <0.865 when the market starts taking profits. This business is a sinking ship even with free money from taxpayers.

    Cash back company Cashrewards fell deeper into the red, as its net loss widened to $14 million from the year-earlier $4.5 million shortfall,
    Cashrewards received almost $500,000 in JobKeeper subsidies and cashflow grants.
    https://www.afr.com/companies/retail/universal-store-dusk-th…

    Anything above 0.60 is overpriced.

    https://files.ozbargain.com.au/upload/393946/90715/screensho…

    • holdenmg on 16/08/2021 - 08:18
      +1

      The Commonwealth Govt should have totally signed up for Cashrewards Cashback before spending 500K. They could have used the OzB referral link. lol

    • ihbh on 16/08/2021 - 10:16

      Hope they go bust because the bonuses will go and they'll be fewer/worse bonuses from SB.

      • flagger on 16/08/2021 - 10:43

        You want less competition?

        • ihbh on 16/08/2021 - 14:13

          sorry, missed the don't.

  • Shadowsfury on 16/08/2021 - 08:18
    +2

    I've invested in about 30 IPOs over the last 12 months

    OnMarket is alright but you should sign up directly on their website rather than wait for the linkage to CMC. You can get SMS immediately when a deal goes live.

    Some I've applied directly after seeing the prospectus. Others have been through full service brokers which other posters have mentioned.

    Overall it's been profitable but it's ALL over the place - sometimes I've lost 50% in the first couple of days, sometimes I make over 100% on day 1.

    Can PM me if you got more specific questions.

    • mskeggs on 16/08/2021 - 09:08

      How do you deal with the opportunity cost of scale backs, where you need to commit, e.g. $30k for a couple of months before they allocate you $1500 worth of shares and a refund for $28500?

      • dazweeja on 16/08/2021 - 09:49

        I have this issue right now with an equity raise for Poseidon Nickel. They are offering each retail investor the opportunity to buy $30K of shares but the raise is capped at $3m for retail investors. If every investor took up the offer, they would get ~$500 worth of shares. Great prospects for this company IMO but tying up $30K for however long it takes to get the refund doesn't seem worth it.

    • knowwhat on 18/08/2021 - 20:57

      cheers mate

  • tyarrhea on 16/08/2021 - 09:37
    +1

    Having worked in the institutional space; IPOs are all about relationships with the lead broker/underwriter or with the company management itself. Without that relationship, you're looking to play in the retail space which will be a small allocation subject to scale backs. Believe it or not, I've seen the final allocation during the bookbuild and it is a case of the broker and management deciding on how much they want to allocate depending on the bids.

  • ihbh on 16/08/2021 - 10:15
    +2

    Noobs asking about getting into IPOs after a strong bull run is the bell being rung at the top of the market.

    Take your own advice and avoid them like the plague.

  • Baysew on 16/08/2021 - 10:39
    +1

    Upcoming floats and listings

    Some reading for your second question - Winners and losers: Australia's best and worst IPOs of 2018

  • prakashats on 28/12/2021 - 20:29

    When a private company issues shares to the public for the first time, it is called IPO or Initial public offering. The company can decide to go public for a number of reasons including raising money for growth or to allow employees, owners, or early investors to liquidate their shares.
    For more Details: https://adityatrading.in/posts/what-is-ipo/

  • Hearthstone on 29/12/2021 - 12:53

    most IPO should be avoided especially now, when IPO got to retails you are at the bottom end where the big boys don't want it
    google and the like IPO offer don't go to retails they go to the big boys

    plenty of quality with proven track record you can buy on the current market
    no need to go down the risky end unless you want to be in it for a quick bucks

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