While there is money to be made from investing in share placements, there are also a lot of associated risks if you don’t know what to look for. Below, I’ve highlighted some of the key questions you should answer before deciding to invest in any company and business.
Beyond the company, who is, of course, the star of the show, there are a number of key players working behind the scenes to ensure a placement comes off smoothly. Given you might not be aware of just how many are involved in the process I thought I’d give you a look at who else is involved in the process.
Secondary offerings - What you need to know: A secondary offering occurs with the issuing of new equity for a company that is already publicly traded on a market. Secondary offerings are often referred to as share placings, placements or ‘seasoned offerings’ and are typically used to attract new investors into a company.
Hotel Chocolat, the innovator of the chocolate bond, which allowed customers to invest in the business in return for repayment in chocolate, recently IPO’d and all the institutions involved in the float have since seen their investment increase by more than 30% – and the stock price is still rising.
Rather than looking back at past performance, this month’s review is taking a look forward. Having followed the fortunes of a list of industry leaders over the past year, we are now focusing on the prospects for these businesses’ equity worth - based on the market’s best endeavours to forecast future earnings and dividends.
One year on from our initial ‘Identify and run with your winners’ blog, this article looks at both last month’s news and at significant developments affecting performance over the past year. With the US election taking centre stage, November 2016 is shaping up to be a critical month for financial markets and certainly a more interesting one for UK equities than in October, where most of our blue chips marked time in ahead of the Clinton v Trump vote.
A regular request from readers of this blog is for further advice on the subject of how to minimise the risks of investing in smaller companies and to provide an insight into the portfolio of UK funds which are so invested. Many express confidence in the ability of smaller companies to outperform larger ones (citing such logical factors of their being more flexible and adaptable), but are wary of the inherent risk that smaller firms are more likely to fail. The merit of spreading monies over many business sectors, as well as a larger number of individual companies, is especially pertinent to investment in smaller companies.
Most readers will appreciate the merits of diversification – of assets or within a particular asset class – and then tend to increase exposure in certain areas according to their assessment of where best value or opportunity resides.
Before the 2015 general election, the department for Business, Innovation & Skills, then presided over by the Rt Hon Vince Cable MP, had a section devoted to improving private investor rights and preparing for the end of paper share certificates as required by the EU.
As I write, this company in the support services sector is showing a dividend yield of 6.9%. At its 52 week high, it was 5.4%. So you might think it was in the 25 stocks I mentioned in my ‘rewarding strategy’ article, but it wasn’t. This was because, even though it is in the particular portfolio I mentioned in that article, I cannot be wholly confident of the dividend’s sustainability.
ARM Holdings has been acquired by Japan’s Softbank Group. Do you mind? Some people do, either because they think ARM was sold cheaply, or because it’s yet another British champion sold overseas. Alex Brummer, City Editor of the Daily Mail, calls it “an ill-conceived deal conducted with undue haste” and “an economic error”.
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