Forum Archive Index - May 2004

["SJ.Greaves" <SJ.Greaves@xtra.co.nz>]

The first rule I use when looking at an IPO is, what are the funds raised being used for. If the money is going to be used to expand the company it may be worth a look. If most or all of the funds are going into the pockets of the current owners it's more than likely a dog.

 The money raised in this case I believe is all going to the the current owner. Who has decided this company has so much potential to grow, they want out to let the new share holders take the proposed profits.

 You would also have to ask yourself where the growth for a carpet company is going to come from in the current market. There must be little potential for growth in the new home market, as new house numbers have proberly peaked and will more than likely reduce. Rising interest rates will make existing home owners think a lot harder before splashing out on new carpet.

 I would give the Mike Pero float a big miss for much the same reasons as well. Both these stocks could get of to a good start but medium term will proberly disappoint. 

 One IPO I will be getting a prospectus for is Pumpkin patch. They are using the money raised to expand into the UK. The current owners will continue to have a major share holding in the company. There trendy baby wear should really appeal to the poms.

 I'm not that good at reading and making sense of an entire IPO prospectus as well. However I read an Australian article a while ago that said 95% of IPO's didn't get within 20% of there proposed results after the first 12 months. So if you understand all of a prospectus, you still only know alot about nothing. You still need to go back to the  basic fundamentals of the company and what they intend to do.