Friends may have seen the news that an Australian Chinese company is going to be listed on the Australian Stock Exchange (ASX) in the past few days. Some media began to use hyperbole words such as "unprecedented prosperity" and "high-level friends" to promote it.
Chinese investors have always been keen to take part in buying new shares, linked to the objective environment in China's capital markets. New shares in the domestic too difficult to snatch, sign on basically equal to want to come to a few limit board! But Australia is not. Because of the characteristics of Australian capital markets, trading in new shares is not necessarily an opportunity to make money. Well-known companies are also likely to break their IPO prices, and companies that are less bullish are likely to continue to rise after they go public. Therefore, the quality of the new stock is particularly critical.
So, how do you participate in the IPO in Australia? How can I pick a good new stock? Today, let's talk about what we need to know about investing in a new stock in Australia, IPO!
[what is IPO]
IPO's full name is Initial Public Offering, the initial public offering. Non-public companies are listed through the completion of IPO, as listed companies, issuing stocks and bonds.
In the world, there are still a lot of companies choose not to become listed companies. But to become a listed company has the following four main advantages for the enterprise.
Companies at different stages can be listed. For the middle and early stage enterprises, becoming a listed company can obtain the funds needed for the development immediately, standardize the management of the enterprises, and improve the popularity and image of the enterprises. Like AfterPay., the online payment company that went public this year. As an early company, AfterPay went public in a low-key manner, and its business grew extremely quickly after it went public. Its share price has also risen from $1 to more than $2.50.
Afterpay stock price chart
For mid-and late-stage companies, listing can help existing shareholders withdraw, but also introduce new investors. IDP Education, an education company that went public at the end of last year, is a good example. Seek.com.au, an early-entry shareholder, withdrew its investment at a IPO price of $2.60, while the Australian College Alliance continued to hold shares. This not only gives new investors the opportunity to participate, but also gives the market confidence. After the listing, IDP shares rose nearly 60%!
IDP stock price chart
[how to become a listed company in Australia]
The main Australian stock exchange is the Australian Stock Exchange, (Australia Securities Exchange, or ASX). In addition to this, there are NSX, Chi-X, the state power exchange, and SSX., the Sydney stock exchange. This paper mainly discusses the listing situation and requirements of ASX.
Less well known, ASX is the world's top five exchanges in terms of financing capacity, with annual trading volume of A $ one trillion one hundred and ninety nine billion nine hundred and ninety nine million nine hundred and ninety nine thousand nine hundred and ninety nine in 2015. This is linked to Australia's third-largest pool of funds in the world, amounting to $1.7 trillion. At the same time, ASX has 47% of non-Australian capital, which can help companies connect with international capital through listing.
And, compared to other major exchanges around the world, the ASX listing threshold is relatively low.
The following is a summary of the main requirements for the listing of ASX, as long as the company can meet the number of shareholders, and meet the asset or profit test, you can apply for listing in Australia.
With a low threshold and a large amount of Australian and overseas institutional capital involved in investment, there is an interesting phenomenon in the Australian stock market: good new stock ransack, bad new stock burst.
So how can we pick a good Australian new stock?
[notes to the selection of new units]
Any new stock project will provide "prospectus Prospectus" to investors. This is a very thick material, often more than a hundred pages. As required by law, this material details the company's business model, revenue and profits, management team and shareholder information, future development plans and risks, etc. Before investing in new shares, it is necessary to understand the contents of the prospectus.
After all, due to professional and language problems, many Chinese investors say they can't understand the prospectus. Then, you need to ask the following key questions:
Industry and growth
The industry itself and the growth of the industry is particularly critical. In the current Australian economy, for example, no mining or energy company will be sought after by capital. For the real estate industry, capital will also be more cautious. And in the near future has been unable to grab the good new shares are concentrated in technology, medical and other sectors.
Company quality
Even if the industry is not good, if the company's profitability is outstanding, then it is a good new stock. The issues that need to be studied include:
Financing use
Financing has multiple uses.
It would be good for investors to raise revenues and profits by financing new technologies or projects, or by opening up new markets. Investors need to be cautious if they do not bring in new business simply to pay off their debts.
risk
What is the biggest risk factor for the company? Commercial risk, market risk, personnel risk, exchange rate risk? How will the company deal with these risks?
Pricing and valuation
Another factor that determines the performance of the listing is the pricing of new shares and the valuation of the company. If a company has assets and revenues, it can use a financial model, using multiple ways to refer to the listed companies in the industry, to price the enterprise.
But if it's a mid-to-early-stage company that doesn't even have the profitability to rely entirely on "pie", valuing is a difficult, artistic thing.
A good company could go public because of overpricing, as was the case with MYOB, an accounting technology firm that went public last year. Because of the valuation and pricing is too high, MYOB after the listing burst down, so far has not returned to the issue price.
After MYOB goes public, it breaks the offer price.
And a very mature company, if pricing is reasonable, after listing will still have a good performance. This year's listing of logistics technology services company WiseTech is an example. Its share price continued to rise after the listing, up more than 40%.
WiseTech stock price chart
[how to get New share Information correctly]
Investment banks and securities firms
New shares are often listed by investment banks or securities firms for underwriting and issuance. In particular, large-scale and high-quality new equity projects will choose big brand investment banks and securities firms, such as Magri, UBS, Deutsche Sachs, Goldman Sachs, Morgan Stanley, Citi and so on. These institutions will also work with securities firms such as CommSec, NabTrade,Bell Porter. If they are customers of these companies, they will naturally be able to obtain information about their listing.
New share subscription company
OnMakets Bookbuilds, a new stock subscription company founded last year, is also an option. The company offers investors the opportunity to subscribe for new shares. Unfortunately, however, most of the projects are still relatively small, and there is no information available in Chinese.
In addition to the above-mentioned professional funds own initiative to select new shares for investment, Australia also has a number of specialized management funds engaged in new shares, targeted issuance, private equity investments. It is also an option to hand over funds to a professional fund team to invest.
[poor and rich capital markets]
Whether it's Australia or overseas, new shares or new offerings, or other investment opportunities, such as stocks or real estate, very good projects often don't have a lot of exposure, or even avoid exposure. Investment banks give priority to better projects to large funds, private equity and family offices. Even some projects will appear several times, or even a dozen times over-subscribed! At these times, retail investors do not have the opportunity to participate. Whether you or I admit it or not, the capital market is indeed poor and fond of wealth. When investment banks, funds, securities firms, high net worth investors subscribed, can be the turn of retail investors, if the remaining words. Of course, people and institutions compete on an equal footing when it comes to privatizing state projects such as Medibank.
So, when we can recognize these objective facts, we will understand that good projects need to be the right channel, if only rely on the circle of friends or newspaper promotion to obtain high-quality new equity opportunities, it would be a big mistake. Even if you get the relevant information through these non-mainstream investment channels, I recommend that you consult with professional investment institutions, rather than blindly think that all new shares are a good opportunity to invest!
