Market makes ground
Published in the Geelong Advertiser, November 2011 by Dale Gillham
When it comes to the right strategy to use for buying into company floats, investors continue to remain none the wiser when considering opportunities.
Glossy offer documents, high-profile marketing campaigns, enthusiastic brokers, and the ability to buy without brokerage can be strong motivators for investors to pull out their cheque books. But would it surprise you to know that in around 50 per cent of floats, the share price will fall way below the offer price in the first 12 months?
The Myer float in 2009 for example, helped by the brand, received an extraordinarily high level of publicity and subsequent uptake by retail investors.
What most investors failed to consider was how the Myer family did not intend to hold stock in the company post-float and how depressed consumer spending post-global financial crisis in the retail sector was likely to impact.
Myer shareholders paid $4.10 for the stock, it debuted on the market at $3.88 and since has experienced a harrowing ride to as low as $1.99.
Investors need to place more importance on the real statistics and the risk associate with buying a float over marketing hype.
In good news for us, even with all the confusion in the world, last week the Australian share market broke above the September 2011 high of 4425 points. More importantly, the market continues to find support and my analysis indicates we are likely to see further rises.
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