IPO- The Moneymaker ?

Like many other small investors, I used to think that an IPO (initial public offer) issued by a company is a way of making fast and easy money. In fact it used to be that about 10 years ago but somehow, lately I noticed that the valuation of IPOs has tended to be on the high side. Examples are PChem at 5.04, ARMADA at 3.60 and now FeldaGlobal at 4.60 and Gas Malaysia at 2.20.

I remember  Air Asia IPO was at 1.25 and so as ThPlant. These were affordable prices for  individual investors and as a result wealth was shared all around. Higher valuation gives the impression that the company is doing well and also extend more opportunity to institutional investors to get the shares.

Another consideration now in light of the Facebook IPO fiasco about 10 days ago, is the nonavailability of certain information regarding the company to retail investors who apply the IPO in good faith only to suffer losses as the price depreciated following the listing. Some people who are in the know stood to get a lot of money from this unlevel playing field. FB IPO lost some 18%  of its value by end of the week of its listing.

Facebook  IPO - The fumbled sale of the century (Getty Image)

The hype about this tech IPO was over the top. Everyone who intended to make money was almost sure that the listing was godsend. What they forget is to look at the fundamentals of the company and its business model.

Selling advertising space in FB used by some 900 mil  people, sounds very good but how much earning has the company achieved prior to it being made public? Sure FB Inc. made money but the people who put their money wishing for the share price to soar are sure disappointed this time.

Imagine FB Inc. was valued higher than SHELL which has tangible assets unlike the former . That in itself should have alerted some investors to rethink their intention.

So Facebook IPO is no moneymaker for small investors.

As I said before this very public fiasco, I had faith in IPO. I have applied so many and got some and not others. And I must admit I did make some money but with higher capital outlay like in the case of PChem. Now I am wishing I have not applied for Gas Malaysia IPO which closed on 25 May 2012. The valuation is made at 18 times its PE and it was pointed out on 27  May that the prospectus which I failed to read was rather vague on the financial performance of the company apart from being affiliated to big names like Petronas Gas. I am rather worried that much as I wanted to lessen my risks during these "unusually uncertain" times , I  still have a soft spot for IPOs. Emotion is not good in investing.

 I hope I am wrong about Gas Malaysia Bhd IPO.

As for FeldaGlobal IPO valuated at 4.60? I think I am going to give it a miss and buy the shares in the open market a few weeks after the company's listing.