With the Brexit agreement now in place and the uncertainty it caused cleared, the London IPO market is seeing its strongest start since 2008. But according to Freedom Finance Europe, the online broker for trading securities, retail investors need to take a careful look at the company before they invest and take advice.
Timur Turlov, CEO of Freedom Holding Corp said, “Retail investors need to take a careful look at the company before investing. That means not just the historic financial performance, but also the quality and stability of the management team, as well as the credibility of the promoters.
“Investors must take the time to study other listed companies in the sector and seek advice and guidance from experts to see how their growth can be compared, as well as comparing their PE (market price to earnings per share) ratio. Retail investors should also look at the quality and experience of existing institutional investors such as private equity and venture capital.
“We would urge retail investors looking at IPOs to turn to experts such as ourselves to help with investment decisions as very often little is known about an unlisted about-to-IPO company,” continued Turlov.
IPOs are a way for privately owned companies to raise money by selling shares to the public. Before a new stock issue reaches the market, investment banks, which generally underwrite the IPO, sell shares.
In a typical IPO, pre-IPO shares have traditionally been reserved for sophisticated investors or institutions who have access to the deals, with retail investors having to wait until trading takes place through a market such as the NYSE or LSE.
Turlov added, “We offer the retail investor an opportunity to actively participate in an IPO via our traders or via Freedom24.com, our online stocks store.
“With more money raised through stock market listings in 2020 than in any year since 2007 – some $300bn raised in flotations according to Refinitiv – the appetite for active participation in IPOs is growing amongst retail investors.
“The rules of engagement are clear: turn to the experts, turn to advisors such as ourselves, do your due diligence, and if the company has strong fundamentals and you believe that company over the long term, then it is good to get in early. But never forget you are buying a company and not the hype around it,” concluded Turlov.