Who would not want to have the shares of the best companies just before they go out to quote?
One of the best ways to try to make money on the stock market is trying to be one of the privileged ones that have titles of the most fashionable companies even before they are listed.
This, in a way, gives you a privilege, being something like a shareholder before the company goes public, although in reality things are not that easy.
That is why people always try to get into the most fashionable actions in this way, whether they are Inditex, Facebook, Alibaba or Spotify.
If we start analyzing many of these IPOs, we can verify that a significant part of them, if not more than half, behave quite badly after going public.
Examples we can see every year in all markets such as the well-known cases of Facebook, Alibaba or Spotify.
In this case we can see that the days of the stock exchange were not at all a panacea, but quite the opposite.
Without going any further, the other day Spotify fell more than 10% in its opening.
The fact that the investors who bought those shares before the IPOs were happy or not would depend on the price at which they bought.
In short, buying shares this way is something different to buying them in the market, where we can see the price.
It is not something that initially attracts me very much.
I suppose that we have two types of buyers here: those who are looking for the ball of a few days, hoping that the stock will shoot off in the first session, and those who seek to invest in the long term.
In either case I do not believe that buying before the IPO is an essential advantage, since seeing cases like Facebook, the best thing would have been to wait until the initial madness was diluted for months later to come at a good price both for investment and short-term speculation.
However, this is only a personal appreciation, and I am not the best person to give a lot of advice on IPOs, because I do not have much experience with investments in them.
But from what I see in other previous cases is not something that we should expect a magical system to make us millionaires or anything like that.
The real money earners are the dealers and the true owners of the companies, which own them very much before any IPO is considered.
Well, it turns out that last year there was one of those typical IPOs that are the dream of the “ipoians” speculators, in which the shares of the company Naga, rose like the foam in the first hours of their quotation.
The climb was really spectacular, multiplying by 3 in a matter of a couple of days.
Those who were lucky enough to have had the shares before the IPO proved that they could sell them and get triple the money in a couple of days.
Unfortunately, that case showed us how fucked up the world of the stock market is, a world that seems to be only happy if it sees us lose; I mean: retail street investors.
In a Rankia thread (Spanish investing forum) that shows us perfectly how corrupt this world is in which we live.
It turns out that a series of Spanish investors with accounts apparently in Hanseatic Brokerhouse received recommendations to buy these shares before the IPO.
With a good campaign and a promising company, some of these investors bought those rights.
In the thread I even saw that they sold at € 2.47, which is not bad considering where the price quoted a few hours after the IPO.
Others say that they were only given 25% of the subscribed shares and they returned the rest more than 15 days later than normal.
With comments like these we can make an idea of the mess.
What happened is that the day the shares went public those investors found that nothing appeared in their accounts. Moreover, days later the thing remained the same, and the broker who had guided them, the one mentioned before, did not give them any satisfactory answer.
The shares came out at 4 euros and quoted according to the thread up to 19 euros.
Many of them only received the money days later, and others received the shares when they were quoting again at 6, 5 or 4 euros, in an almost capricious way.
Well, supposedly, and according to Hanseatic, there were problems due to technical difficulties between the agent in Germany and the receiving banks in Spain.
Interestingly, this happens in a case in which the shares tripled in price in a few days.
How strange is not it?
What does this sound like?
Well as they said in the forum, the typical case that if the stock goes up I keep the money and if it goes down I give it immediately to the investor.
You can be sure that the German dealer had no “technical obligation” (otherwise it would be moral) to put the shares on behalf of his Spanish investors.
Having the money in their possession, the easiest thing for them would be to buy the shares as a complete package.
If the stock had gone down there would have been no problem.
Almost instantly, Spanish investors who could not have argued would have been presented at the current market price.
In case of rising the dealer would be a significant gain in a portfolio of “omnibus” actions that depend on your account and to which you should not explain to anyone, in theory.
Suppose you had shares worth 400,000 Euros, which were the contributions of a series of small Spanish and foreign investors, one contributing 5,000, another 2,000, another 15,000, and so on.
A rise in that way would have made that portfolio of 400,000 euros worth 1,200,000 in a matter of two days.
At that time the broker could sell and keep the benefit.
If the stock keeps going up you could claim that you had “technical problems” and that the purchases were not executed for the reason “x”.
In case of lowering the price, all you have to do is repurchase the shares at a price similar to what investors “bought” and “give them the same.”
As we saw, and according to the comments, they decided to do both, depending on the case.
In some cases they returned shares at a certain price, and in another they said that most of the shares were not executed.
What does seem clear is that the dealer could get a profit of between 400,000 and 800,000 euros net in a matter of 2 days, without risk and without putting a dime.
Do not you think?
Making money with IPOs is not as easy as it seems
Those who risked, in cases, important parts of their savings, took nothing, and were several days fearing for the integrity of them.
Another thing that I wonder is if this happened only with Spanish investors or also affected other European countries. In the second case it would be easier to do a joint investigation and try to go for the culprit. However, I suppose the dealer will always have an excuse, and even more so with “friends” on the Exchange.
In the case of Hanseatic, curiously one of the most prestigious brokers on the national scene, these would be enough to deny that the problems were due to them.
By the way, the issue of Naga has to do with a very innovative financial markets broker, which mixes copy trading with other projects such as its own cryptocurrency and blockchain developments, which makes the matter even rarer.
There are even those who say that this issue of ICO is a scam like a castle, although this is something we leave for another time.
As you can see, this issue of the IPOs can be very rough, and for what this example shows us, it is almost better that we stay apart when there is an issue of these, unless it is with a national company and all through a bank, although in cases like that I do not think you were going to make a lot of money anyway.
Seeing cases like this should teach us that we almost better stay out of this type of investment, because as we see, a lot of occasions are investments that do not work well, at least input, and in other cases, like the one seen, “they” steal everything they earned when things go as expected.
In short, we see again that in this world of the stock market we cannot expect to earn much without having a great risk of being stolen, in one way or another.
That’s why books like Livermore’s already show us for a long time that this is a world full of sharks, where we will be constantly attacked from all angles of the dealers.
Money on paper is pure vice; the electronic one is even worse.
It is too tempting and easy to manipulate.
Greetings and good trading
Original article: Es fácil ganar dinero con las IPOs?