1923 was the year this was published. Yet this remain true after 82 years.

"When companies are first organized and their stocks are listed on the Curb or
New York Stock Exchange, they are held by insiders or people who form the
companies and sell stocks in order to carry on the business. Therefore, they are
distributed to the public. While they may advance for a short time after they are
first brought out, the man who buys and holds them is sure to have big losses, if
not suffer th loss of his entire capital before he sees a profit."
W D Gann, 1923

To sell their stocks, the insiders need the retail public. For the retail public
combined buying power is far bigger then the institutions. In singapore the past
few years, the issuers have purposely starve the retail public by allocating only a
very small tranche for them. The insiders wnat to induce the retail public to rush in
when the stocks begin trading.

Yet in Singapore the retail public never learn this. Their greed blind them. Like
fools they choose on their free will to be enticed. And when they realised their own
folly, they whined, complain and curse others. As long as they continue to chase
IPOs they don't deserve pity.

Hi CSK

U r short & sweet, concise to the point.
Thanks for sharing :P

This is so because everyone wants to earn a few quick bucks. So the history will likely repeat again and again. To borrow Jesse Livermore's words : ".... Whatever happens in the stock market today has happened before and will happen again ..." :)

.

csk,

May I ask which book are you quoting from ?

Thanks and regards.

Unlisted Company is on a rapid expansion phase and use bank borrowing to gear up the speed. When its operation market is good, no problem; but when market turn bad, the loan and interest piled up and the company is unable to repay these loan in time.

So loan was restructured, but still no sight of recovery. Not only the company get worried, the bank too.

Bank have to think of a way to get back the money, but since the company was unable to repay the loan using its own operation or from their shareholders, yet as a going concern, force selling of securities will ruin the company. Then someone come up with a better way: tap onto the capital market and go IPO, issue more shares to the public.

So listing consultants was engaged. The pre IPO account has to be presentable, so sales target was set (company start bidding contracts at lower margin), cost was contained (company start negotiating with supplier with promised of better rates/business after IPO). When every thing is done, the big milestone for the company: IPO. IPO money was used to repay bank loan, and as working capital and finance future growth.

At the end of the day, unlisted company become listed company. Bank recover their loan, listing consultant gain business, IPO underwriter gain business (these 3 are often related, if not from the same group), unlisted company shareholders get to off load their potentially worthless shares, company directors can have a huge paycheck as director fee to keep on par with that of other listed company.

Happy ending, yes. But not to all. Those retail investors now have their hard earn money at risk for a unknown prospect of the company.

Horror story isn't it? Is it true?

hybridvestor,

The book is Truth of the Stock Tape by WD Gann.

Thanks :)

When I was preparing for the NASD Series 3 and Series 7 exam about some 20 years ago, a compulsory requisite before I could talk to customers in a U.S. based local brokerage, I remembered that when a company was going IPO that they could only place "Tombstone" advertisement and issuance of propectus. Any other form of communication (radio or TV) to the public must be included in the propectus. They were not allowed to "market" the IPO company through any means as this would seen to be marketing and a solicitation to buy their shares.

I remember last year when one company was about to IPO, I saw advertisement on TV showing various local TV actors and actresses congratulating the company on their IPO. I was quite uncomfortable that Singapore securities laws have degenerated into such a low state. Could this not be viewed as a form of IPO marketing and/or a masked form of recomendation to buy the IPO shares? Any Singapore securities rules broken there?

Today, I was shocked when I came to pages 11, 12 and 13 of The Straits Times:

Page 11:
Big size letters - "A treasure chest of opportunities awaits..." - showing a treasure chest with the marking stxPanOcean

Page 12:
Big Size letters - "Discover investment gems within" - showing the same treasure chest but this time opened and a group of well dressed people similing and attracted to glitters coming from within.

Page 13:
Around the middle of the page in big size letters "Apply for STX Pan Ocean Co., Ltd.'s IPO today!"

This is very much frown upon by the U.S. SEC but then this did not happen in the U.S. and did not involve any IPO or exchanges in the U.S. so no U.S. securities rules were breached.

To support my point, read the very last paragraph on page 13. Does this paragraph not imply that there are strict laws in the U.S., Canada and Japan against such advertisement to market the IPO? U.S. laws are enacted for reasons the U.S. authorities have learned are necessary and appropriate to the public interest and protection of investors. If this IPO is registered in the U.S., such advertisement will not be allowed. This is what I had learned some 20 years ago. It is my understanding this has not changed since.

The last paragraph:
"These materials are not for distribution, directly or indirectly, into the United States, Canada or Japan. These materials are not an offer for sale of the securities of STX Pan Ocean Co., Ltd. in the United States, Canada or Japan. The securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. STX Pan Ocean Co. Ltd. does not intend to register any portion of the offering in the United States or to conduct a public offering of securities in the United States."

Once again, as in recent years IPO practice, the retail public is "starved". Total offering is 600,000,000 shares while only a minimum 30,000,000 shares (a mere 5 pct of total offering) is allocated to the public.

"A treasure chest of opportunities awaits..."
It is coming to a year soon. Where are the opportunities?

"Discover investment gems within"
Is proft warning for the 1st quarter (6 to 9 months after IPO) one of the gems?

Apply for STX Pan Ocean Co., Ltd.'s IPO today!"
Did you? And so happy to lug the treasure chest home?

Now do you know why the US' SEC frown on this type of IPO marketing? They
have learned from experience. It it time that the authorities here in Singapore
enact similar laws if they have not done so. The sooner the better.

The next time you see this type of advertisement you be careful.

This is the other one where many popular local TV actors and actresses appeared
on TV to congratulate the company during the run up to their IPO in 2004.

Again another of those IPO marketing frown on and disallowed by the US' SEC
if this was in the US. Unfortunately it was not but right here in Sinagpore.

This is how this IPO has beome, the very one that your favourite stars congratulated.