LAHORE:
In an attempt to mobilise savings, Lahore Stock Exchange (LSE) has taken a series of initiatives which are expected to attract new retail investors into the stock market.
The focus of these measures has not only been on creating awareness and promoting the initial public offerings (IPO) taking place in the market, but also helping first-time investors to take appropriate decisions on upcoming offerings, LSE said in a statement.
As part of this strategy, LSE said it had introduced four steps to promote awareness of new IPOs. The first step involves arranging special presentations by companies for general investors in order to help them understand financial prospects of the likely investment while the second step involves use of LSE’s website for prospectus, IPO application forms and company presentation.
Under the third initiative, a help desk has been set up to provide adequate information to the investors while under the fourth initiative, LSE has allowed placement of banners and other marketing material of companies making IPOs within and outside its premises to attract the investors.
Published in The Express Tribune, July 7th, 2011.
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During last few years market have witnessed small number of IPOs. Purpose of IPO is to generate cash through stock market. What we have seen is that big companies (blue chips) throw their 'bad performing' company using the goodwill of its 'good company'. It results in successful IPO and destruction of small investors. Usually at the price of the company is through IPO, these prices are usually not seen within 1-5 years. Reason is quite simple. Over-valuation of the stock at the time of IPO and high expectation of 'quick' profit leads to general greed, ending up in losses or low value of the stock. When a stock is offered through IPO, general investors expect good and quick profit but it is very important to see the financial condition of the company before investing in IPO. IPO doesn't necessarily mean good profitable trade. Following three simple rules will end up in profitable trade and 'no loss' from IPOs.
First, investors should look for atleast '3 years consecutive profit' in the financial reports of the company. This practice will filter out those companies which show good results in last reports to lure investors. If there are losses in previous years and the company have suddenly started to show profit may mean 'collect cash from public through IPO and say bye bye'. Second, don't believe in companies projections which may be hyped. Projected financial results usually go wayward due to various law and order and economic reasons. Third, usually the price of the company rises before IPO which entices investors to invest. WAIT!!! Don't rush and let the bubbles get settled. If the price is rising before IPO then the price can fall before IPO too. You cannot always end up in profit but will surely make big losses being unable to sell when the price continues to fall without break. Stock exchanges should apply stricter financial reporting rules for companies offering for sale through IPO to reduce investors' losses.