To own a share of ownership in a large, qualified company going public and listing on the stock exchange, investors have two main options.
They can either purchase stocks from shareholders through the stock exchange, which is known as the “secondary market”, or they can be among the first to buy stocks at the initial public offering (IPO) stage – the “primary market”.
Investing in an IPO brings investors significant opportunities and perhaps better return ratios than doing so on the secondary market.
What is an IPO?
An IPO is the process by which a company – whether a public or private enterprise – makes a request to issue a percentage of shares publicly with the aim of raising fund to enhance business operations.
After the IPO, the issued shares will be listed on the stock exchange for trading among investors.
Investing in IPO or primary market
Investing at this stage means that when there is a public announcement about an IPO roadshow, investors can register to buy shares from the company, which conducts the offering through a selling agent.
To buy shares, investors need to contact the selling agent and complete a request-to-buy form and deposit money.
Every successful transaction is executed at an IPO price set at the book building stage (a bidding process to determine the share price), or set by the underwriter and confirmed by the issuer.
During an IPO, investors can either participate in the book building or wait until subscription to purchase shares.
However, as 70 per cent of the total issued shares will be allocated to investors who successfully purchase – those who submit a price equivalent to or higher that announced – in the former period according to the rule, this is a great incentive to be an early bird.
Investors who fail to purchase during the book building can register to acquire the remaining 30 per cent at the IPO price during the latter period.
It should be noted that some new IPOs are able to skip book building under special conditions.
Benefits of investing in an IPO
The primary advantage of investing in an IPO is the opportunity to buy popular stocks ahead of other investors and generate capital gains from selling the shares in the secondary market.
The shares, after being successfully listed on the market, are then freely traded.
As such, new investors and investors who failed to purchase shares at the IPO stage have no other choice but to purchase them on the secondary market.
Normally, in the first few trading days or weeks, the stock price will dramatically soar compared to the IPO price.
This is due to increased demand from investors, as fluctuations in share price are the result of supply and demand in the market.
It is notable that the price limit on the opening session of the first day of trading ranges between 90 per cent and 150 per cent of the IPO price.
This differs from a normal trading day’s daily price limit, which is calculated by adding or subtracting 10 per cent of the base price only.
A second advantage is that an IPO paves the way for retail investors to invest in previously unknown companies showing great potential. It is difficult for retail investors to invest in attractive companies that are yet to be listed.
Thus, an IPO offers an opportunity for investors to buy shares to provide capital to such companies to expand their potential more quickly.
A third advantage is that with an investment made at the first stage and at the IPO price, which is low, investing at the IPO stage can be very profitable.
As the company grows, the share price increases accordingly, so not only can choosing the right stock allow investors to save capital, but they can also receive capital gains (through price increases) from the secondary market.
IPO investment opportunities
Investors can embark on an IPO investment journey right now with the two exciting investment opportunities of 2023 as the Cambodia Securities Exchange (CSX) welcomes CamGSM Plc (Cellcard) and Mengly J Quach Education Plc to the bourse’s Main Board.
CamGSM Plc (Cellcard)
Cellcard is Cambodia’s leading telecommunication company with more than 25 years of experience in providing services all over the Kingdom.
The company has continued to strive despite global financial crises including the Covid-19 pandemic.
Cellcard’s success is primarily due to its focus on quality and its excellent management team with years of experience under its belt.
Cellcard plans to issue $30 million worth of equity securities at a price of 2,279 riel, or $0.57 per share, with a minimum guaranteed dividend yield of seven per cent annually for five years paid quarterly (terms and conditions apply). Subscriptions are open until May 31, 2023.
Mengly J Quach Education Plc
Mengly J Quach Education Plc was founded in 2005, becoming a leading educational provider in Cambodia primarily focusing on education, health, and social and community development.
The company is recognised by a number of foreign institutions, including the US Embassy, which stated: “Aii Language Center is a leading and innovative educational institution in Cambodia, and is considered a model for other schools in the country.”
Mengly J Quach Education Plc plans to issue $10 million worth of equity securities at a price of 2,080 riel, or $0.61 per share, with a minimum dividend rate of six per cent per annum for two years. Subscriptions began on April 10, 2023 and end on June 9.
How to subscribe
Both existing investors on the CSX and those new to it can now take advantage of the rare opportunity to reap the many benefits of investing at the IPO phase as these two outstanding companies go public.
For CamGSM Plc (Cellcard), investors can contact the representative of SBI Royal Securities – the underwriter and selling agent for this stock – by telephone on 023 999 595/077 333 976/077 333 966.
For Mengly J Quach Education Plc, investors can contact RHB Securities (Cambodia) Plc – the underwriter and selling agent for this stock – by telephone on 023 969 161 or via Telegram: https://t.me/rhbsec.
