HOW TO CHOOSE HOT IPO’s

A limited liability company that desires to expand the frontiers of its business is permitted by law to come to the public to raise funds. They can do so by declaring an initial public offering. The investing public is encouraged to buy shares of the company depending on allotted provisions of the company. However, it is incumbent on you to do your due diligence bearing on the claims of the company in its prospectus. To be able to discern the viability of the company, please take into consideration the following tips:

Tip 1

What is the purpose of invested funds? Find out what the company intends to do with the funds raised? Will the company be embarking on developmental projects, expanding the frontiers [Branches] of the company, is the fund going for procurement of equipments and personnel development, or is it going to be used to service debts arising from bad company policy/strategy, Take note.

Tip 2

Is the company indebted, This is very important, find out if the company is solvent? The financial position of the company will be reflected in the balance sheet, if the debt of the company is much, It can really turn out to be a serious problem for investors, since their funds can end up being channeled to servicing debts instead of using it for what it was proposed for.

Tip 3

Low share price. Note that if the offer price of a stock is low and the company has good fundamentals and technical strengths, investors will be at advantage. First, you can buy large quantity of the shares. Second, capital appreciation can double or triple your returns on investment.

Tip 4

What is the earning potential of the company? The financial earnings projections of the company speaks volumes of its ability to give high returns to investors. You must assess the earning potentials of the company vis-à-vis the bonus potentials.

Tip 5

Financial Summary Report. This shows the company’s financial history and growth rate for previous years. Things to look out for includes Gross earnings, Profit before Tax, Profit After Tax, Share capital net assets or total assets, Dividends possibilities, Earning Per share and per earning to ratio.

Tip 6

Pedigree of the company. Is it a brand or does it has the prospect of a brand? What is the antecedent of the company in terms of past performance? You must note the changes and developmental phases, does it have a track record of previous excellent performance.

Tip 7

Board Members. Check out the caliber of people on the board of the company, what is their pedigree, are there seasoned and brilliant administrators on the board, men who are versed in the art of running corporations. Also find out if the board members hold substantial stake in the company because that will compel them to sit up to manage the organization very well, because they won’t want to jeopardize their stake in the company.

Tip 8

Legal Cases. You must investigate if the company has court cases to settle, because it can lead to closure, liquidation or outright bankruptcy. Any legal proceeding in a court; can hinder the progress of the company.

Adhering to these tips will greatly enhance your possibilities, the next time you receive that prospectus, ensure you take time to browse through with the understanding of a prepared stock’s trader.

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