Monday, July 23, 2007
Philippine Stock Market IPO
IPO or Initial Public Offering is what a company does when it decides to open themselves to the public for the first time by offering stocks and getting listed in the Philippine Stock Exchange. This is great way to infuse huge amounts of money into the company that can be used for further expansions. A lot of companies are taking advantage in the current stock boom which has already reached historic highs by going public. This presents itself as an incredible opportunity for investors to earn by scrambling over every IPO that is being offered in the market. With recent success stories like Pacific Online and Phoenix Petroleum whose stock value on the first listing day posted double digit gains, it's no wonder that IPO's are highly sought after and often are many times oversubscribed.
With the almost guarantee of earning from IPO's there has to be a catch right? One of the biggest problems for the investor even if they have millions of pesos to burn is getting the desired number of stocks during the IPO will prove to be difficult as most brokers, both online and off line will only allocate you a portion of your order, most of the time the minimum or board lot will be given to you unless you are a really big client. Some people I know would use the names, personal information and TIN numbers of their friends and relatives to buy IPO so they could be allocated a bigger share. But even if you are a big shot, one of this years most highly anticipated IPO, GMA 7 will only allocated a maximum of 1,000 shares per person and would require a personal appearance before they process your application.
But not all IPO's can sustain their gains and some even go lower than the initial IPO price. Take for example the recent offering of Aboitiz Power Corporation (AP) whose IPO price was 5.80 pesos but it's currently, as of writing 5.50 pesos. This stock managed to go as high as 6.20 pesos on the first trading day which is really not bad but no where near double digit gains. If you have sold you shares at that time you would still have made a profit. But guessing when the stock price will hit the ceiling or bottom out is the tricky part of stock trading. They trick is not to be greedy by holding on to the stock in the hope of winning it big only to be disappointed when the bubble bursts.