Not all that glitters...uses Johnsons wax =p

Our office had an IPO last June 2005 in the SGX market. I think a lot of my officemates subscribed to the IPO at SGD 0.20 per share. Some of my colleagues from the Singapore office were given stocks for free, so that the company could make it up to them for the time that the company was down and they did not receive any increase.

The IPO, honestly, was very enticing, ofcourse, why not ...its an IPO! Most of the investors think that IPO is a good deal, as stock prices of most of the IPOs after the opening day, sky rocketed. Just look at Google, it had its IPO last Aug 19, 2004. IPO price was at $85, if you are still holding on to that stock now Jan 10, 2006, the stock is now worth $466.9001. You'd drool at the current price! Its 5 times the IPO price, thats 500% increase in just 1 year, its like winning the lottery.

But ofcourse not all IPOs have a happy story to tell. In the local stock market, 2 very prominent companies had their IPO last year. Manila Water Company (MWC) and SM Investments Corp (SM). MWC had an IPO price of P6.50 while SM is at P250. Both IPOs were oversubscribed. The two IPOs were from the best of the business industry: MWC by the Ayala's and SM by the Sy's. I expected both stocks to skyrocket at the first day of trading and continue with its progress, but the sad thing is, it did not.

For MWC it did reach a high of 7.60 but has started to go as low as 5.60 and has since been fluctuating above and below the IPO price (most of the time it was under the IPO price).

For SM, it opened below IPO price, slid down to 216 level in a few days and has never gone far beyond 260 level. Most of the time it was under the IPO price.

Good thing I was late in subscribing to MWC shares, if I did made it in time, I would have been holding this stock for nearly a year now, and still no significant increase from the IPO price. That's why when the IPO offer was announced in our office, I immediately remembered MWC and SM and so I declined the option to buy the stock. Fortunately enough, when I checked the condition of our office's stock price recently, it has already dropped nearly 50% from the offer price. Imagine that!... the money that you invested last june has now decreased by half! (Its like a mid year 50% off sale on the price of the stock!).

For those of my officemates who are holding on to this stock, all I can is say that we could hope that "patience" will have its rewards, but if you do not have patience, I suggest you immediately exit this stock once it bounces back to a level where the profit can cover for your expenses.

I will be posting my analysis on this stock in the next blog entry. Watch for it!