Initial Public Offerings (IPO)

Here at The SMSF Club we pride ourselves on giving clients access to leading investment opportunities that they would not otherwise gain access to. For that reason we have partnered with OnMarket to give you access to invest directly into ASX Initial Public Offerings (IPOs).

IPOs have traditionally only been offered to big clients of large investment banks being sophisticated investors or institutions. Thankfully, now with the joint venture between The SMSF Club and OnMarket you can gain access to ASX IPOs using your SMSF.

Initial Public Offerings (IPOs)

Here at The SMSF Club we pride ourselves on giving clients access to leading investment opportunities that they would not otherwise gain access to. For that reason we have partnered with OnMarket to give you access to invest directly into ASX Initial Public Offerings (IPOs).

IPOs have traditionally only been offered to big clients of large investment banks being sophisticated investors or institutions. Thankfully, now with the joint venture between The SMSF Club and OnMarket you can gain access to ASX IPOs using your SMSF.

What is an IPO

An initial public offering, or IPO, is the first sale of shares by a company to the public. If the company has never issued shares to the public, it’s known as an IPO. The reason why the company may issue shares is usually to fund future growth, pay down debt, or to buy out existing shareholders. Many investors describe investing in an IPO as gaining shares in the wholesale market prior to the shares being listed on the exchange (secondary market). When a company issues shares via an IPO they must provide investors with a prospectus.

Why invest in IPOs

In 2001, the UK government launched the Myners Report following the Royal Mail IPO, which climbed 38% on the first day of listing and reached 87% above its offer price six months later. the report examined IPO performance in 52 countries, and quoted research that Australian IPOs studied since 1976 returned on average 21.8% to investors on the first day of listing.

Risks

Whilst the statistics from the Myners Report presents a compelling reason to consider investing in IPOs you must first understand that when comings list via an IPO the risks are very high. Many companies that list fail to trade above their issue price. Many falls substantially. Despite the allure of quick gains, IPOs should always be considered as speculative.

IPO risks

• Lack a stock-trading history: It’s impossible to see how the company has performed historically because an IPO has no trading history.
• IPOs are usually young companies: Smaller and fast-growing companies are often the ones that go public. These companies tend to have limited operating histories, immature management teams, and only a few products or customers.
• Sell their shares first to large institutional investors: IPOs are usually first sold to large investors such as fund managers. When the stock begins trading, investors are free to bid those shares above or below that offering price.

When considering an IPO you must first read the prospectus carefully. within the prospectus the risks of the particular company should be fully disclosed, likewise the experience of the management team, the financial stability of the company, how they plan to use the money raised, and other key information about the company.

IPOs have provided returns to investors historically, it is for this reason DIYsmsf has teamed up with OnMarket to give you access to ASX IPOs, but it is your job as a trustee of your SMSF to analyse the risks and determine the suitability of an investment.

To find out more about IPO’s click here