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Initial Public Offerings


Dsou

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Hi Dsou

voila! https://www.ig.com/uk/investments/share-dealing/ipos

 

although there is a lot of evidence that buying in the primary market is not always the wisest idea. Great if you want to get in early on a specific stock but otherwise you can always buy on the first day of trading on the secondary market, eg FOOT recently IPO'd and you can pretty much still buy those at the price they IPO. Additionally, you may not get a full allocation on the IPO - this notably happened at RMG which led to scaled down allocations largely because of the widespread publicity. Again, this last week almost sunk to IPO levels.

rmg.jpeg

If you wait you can allow the market to determine the fair price (look at Snap chat - below)

snap.jpeg

and unless you are adept at reading listing Prospectuses then buying into IPO can be risky.

 

How does that help?

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Here is an example of a recent IPO that has gone horribly wrong, and resulted in a lot of pain for shareholders. These are weekly bars from the date of listing (June 16) til now.

a.JPG

Look how the badly things have gone here. The shares were actually suspended during October this year, because the company got into severe financial distress, and in this situation shares cannot be bought or sold - your money is, for all intents and purposes, 'locked up'.


The advantage of hindsight here, and of waiting, is that we are able to assess the investment not on the initial IPO prospectus but on the subsequent results announcements that are issued to the LSE. In this case 18 months after listing on the junior market a series of cost increases, pressured margins and amounting debt resulted in a  catastrophic collapse in the share price.

An IPO prospectus will paint a company in the best possible light, it will no doubt will sound attractive, and of course any investor would want to get in at the bottom rung of the ladder of any potential super stock, but patience is a virtue and as demonstrated here, the truth will out eventually.


Regards

Rimmy

 

 

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Thanks James,

 

Quick thoughts on this. Sabre appears to be an insurance company that is going public, selling motor insurance, having about 325,000 active policies at present, 150 employees, 86% of revenues are derived from motor underwriting policies, the remainder from associated activities.

Key points:

ordinary shares:

250m (250,000,000) 

Profits pre tax:

2016 £63.4m

2017 £44.2m ( ytd 9mth )

Pro rata'd in a linear fashion equates at 2017 F/Y £58.9m

Co intends to pay a dividend, subject to sufficient free cashflow, from June 2018

 

Expected date of admission, 22nd December 2017

 

Sales, most recent:

2016 £191.2m

 

Assets in 2016 as £511.2m - a lot of this amounts to intangibles and stripping this out reduces assets to £353.58m, which is a more realistic figure.

 

Company is looking to flat with an IPO value c£213m of which £206m will be used to exchange the Topco Preference shares (£206m) - it is worth noting these shares are 99.9% held by certain Mssrs Bell and Morris. So I read this as the owners are floating and will be foregoing a significant stake in Sabre. Upon floating the directors above will be rewarded £12m in shares, so will remain invested to some extent.

 

Any other views welcomed. On this one I don't have enough cash handy, so probably won't be subscribing. Good luck to all those who do!

 

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