Caution needed when buying into IPOs

Observer writer

Wednesday, July 11, 2018

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“Investors really ought to know what they are buying into when IPOs are being issued, rather than thinking that the price of each IPO can only go in one direction — up.”

That was the warning salvo issued by investing guru John Jackson to his readers, as he fears that many Jamaicans are not looking to buy stocks for long-term value but rather a short-term flip.

“As the stock market matures and more people come to the party of stock ownership, the valuations that new IPOs come to the market at will continue to rise and less immediate potential gains will be priced in. In some cases, investors will need to look long term for the payoff from their investment.”

Jackson noted that several new stocks are strictly long-term play. Yet he observed that investors have been placing heavy sums in the market hoping to double or triple their money quickly.

“A group of investors stated in 2017 that investors cannot go wrong with Junior Market IPOs; all that has to be done is just buy, buy, buy and the investor cannot fail to make money. Some investors in the last two IPOs, Sygnus Credit and Everything Fresh bought into the issues heavily, hoping to catch an early bounce and pocket the profit. That the initial bounce did not last, should be a lesson to speculators.”

Jackson points to another example.

“GWest was another company that many investors got carried away with in pushing the price to $4, with many buying at inflated values. Now the stock trades in the low $2 range,” Jackson points out.

Contining on the new stocks to hold for the long term, Jackson observes that, “Everything Fresh, Sygnus Credit, Stanley Motta and Mayberry Jamaican Equities fall in the category of stocks to hold if investors are looking for a long -term payoff.”

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