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s urging stock market
has triggered a round
of new floats on the
Australian Stock Exchange
after years of little activity, with
investors recently scoring big gains
from listings of internet companies
OzForex and Freelancer.com.
A raft of small-cap mining
companies listed on the ASX during
the mining boom, but in recent
years a bear market and the global
financial crisis have limited the
number of new companies hitting
the market. But that is changing.
Floats lure investors with the
prospect of quick gains, but experts
say retirees focused on capital
preser vation need to be disciplined,
avoid speculative listings, and limit
investments to reasonably priced
companies with strong track records.
A float is an initial public offer
(IPO) of shares to the public. A
company is basically selling a stake
in the company via shares, which
are then listed on the ASX.
As of November 2013, 12 to 14
floats were scheduled in the final
weeks of the year. “I think that’s
probably the first wave of floats,” Ross
MacMillan, Senior Equities Analyst
Australasia, says. “In
2014 we should see quite a number
of floats coming to market.”
Investor appetite for equities is
growing. “ There is more confidence
in the market shown by investors,”
MacMillan says. “A lot of investors
have stayed away from equities since
the GFC, but the Australian market
has now had two years of quite
A number of companies, including
OzForex and online jobs portal
Freelancer.com, have listed on the
market recently and their shares
have traded well above the price at
which they were offered to the public,
which has boosted appetite for floats.
Investors face a low-return and
low-yield environment, particularly
from fixed income, and the prospect
of a windfall from a float is attractive.
However, floats are often
brought to market with heightened
excitement and slick promotion,
but very little track record. Fund
manager and finance journalist
Matthew Kidman, in his book Bulls,
Bears and a Croupier, says floats
are not just a potential trap, “they
are a complete lottery”.
Even big companies can under-
perform. Thousands of Australians
are still sitting on losses from the
sale of the second tranche (T2) of
Telstra, which listed on the market
in 1999 at $7.40, still well below
the current share price of $5.08.
There have been successful floats.
Kidman cites QR National and
Promina, companies he says
have long histories of delivering
acceptable returns and floated at
Retirees could focus on companies
that have a strong competitive
advantage, which allows them to
maintain revenue and earnings »
With plenty of floats coming
to market in 2014, now is
the time for expert advice
on whether and when to
jump on board.
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