In recent weeks, news has surfaced that Blibli, one of the leading e-commerce companies, is planning to go public.
for company Initial public offering (IPO) is a great opportunity to get funding from the wider community. But what about investors? What are the pros and cons that investors will get if they buy IPO stocks? Check out the following comments:
Advantages of Buying IPO Stocks
1. The potential to buy stocks at the lowest price
The first advantage of buying an IPO is the opportunity to buy good stocks at the lowest prices. As Joice Tauris Santi wrote in Kompas in March 2022, among the 11 stocks listed on the Indonesian stock exchange until March 2022, only Only a handful of them are priced below the asking price. Even securities issued by companies such as PT Net Visi Media Tbk increased 74.49% when the article was published.
2. Short term profit potential
New IPO stocks are streamlined. Auto reject above (ARA) and auto reject down (MPA). As a result, prices can rise and fall rapidly without interruption for a single day. Due to the uncertain price movements of newly listed instruments, IDX has relaxed the ARA and ARB requirements.
for day traders This is a short-term profit opportunity. Day traders can enter short positions or long positions depending on the selected stock price movement.
What about the long-term benefits? The long-term benefits of investing in stocks that are new to IPOs are somewhat uncertain. It depends on how the company operates in the future and many other things.
3. Buy at a fixed price
Stocks are financial assets that fluctuate over time. Therefore, investors tend to be very observant in determining the price to purchase this instrument. To be able to set the right budget and calculate the right target price.
In new IPO stocks, investors receive a fixed price. This exact price is derived from the aggregate of stock quotes submitted by investors when book creation process. As a result with buy IPO stocksInvestors can also set a reasonable budget to buy assets and set selling prices more precisely.
Disadvantages of IPOs
It is not often that investors receive the required number of shares of a company or not at all. This can happen especially if the issuing company is a reputable company so that its shares are marketable (over apply) or the company allocates additional shares to institutional investors or retail investor partners.
2. Potential price drop
apply too much IPO stocks also have the potential to cause the company’s share price to drop or decline. Auto reject below (ARB) on the first day. This can happen especially if multi-day traders place orders on the company’s shares.
as mentioned above Day traders make short-term profits. Therefore, when the new IPO stock price skyrocketed according to their wishes. Without further ado, they sold that stock. As a result, sales force Beats asset buying forceSo she lowered the price.
Investors who are buying IPOs for the first time should be more careful about this. Because when it first launched on the stock exchange There is no exact information about the number of traders or short sellers entering the stock market. It is also possible for the stock price to rise again the next day.
3. The price trend is down in the medium-long term.
The biggest challenge with buying stock in a new IPO is the potential for price declines in the medium to long term. Let’s take an example of the state-owned aviation company Garuda Indonesia.
during the IPO Shares bearing the GIAA code are sold for 750 rupiah per share. Despite the ups and downs, in fact, it’s been over 11 years since its debut on the Indonesian stock exchange. The company’s share price never touched 750 rupiah before being suspended at 222 rupiah per share. which means An investor who has owned 1 lot of GIAA shares since its launch. will lose up to IDR 53,000 per lot
Benjamin Graham Father worthwhile investment Like a professor from Warren Buffett, during IPOs, companies tend to quote relatively high prices. This makes it difficult for investors to buy it at low prices.
is normal Because it means that there will be a lot of money coming into the company. Graham said investors should wait until the stock can be bought at a discount.
Is IPO stock worth buying?
from the above discussion In conclusion, IPO stocks are still attractive to buy, but they need to be bought cautiously because of their high risk of uncertainty. especially for long-term investors
Before you buy an IPO, it’s a good idea to ask the following questions:
- What is the proceeds from the IPO process for?
- What are the basic conditions of the company’s finances?
- What is the company’s business potential in the medium and long term?
- Is the stock price at the IPO in line with the company’s business and current financial conditions?
- If the stock price drops to 50% in the near term Will you feel comfortable?
- Would you be comfortable owning stock in this company in 10 or 20 years?
- All in all, how high is your trust in the issuing company?
To answer these questions, of course, you need to do a fundamental analysis of the company involved. The reason is, when a stock is newly IPO, there is no technical analysis that you can use.
You can do this fundamental analysis in several ways, such as:
- Calculation of various financial ratios according to the information in the company’s financial statements.
- Know the purpose of accumulating investments.
- Read the prospectus to discover the company’s lines of business and long-term potential, including:
- After being publicly disclosed by the company, the public disclosure is currently held online. So investors from anywhere can follow.
Buying IPO shares is very interesting. Especially if the company to be listed on the stock exchange is a well-known company. However, investors must be careful. Because buying new IPO shares is very risky.
Please wait 180 seconds or 3 minutes, the secret code will immediately appear under the countdown