Hey peeps I'm alive :D

There seems to be a reader who wonder why this blog has not been updating

Thousand apology and thanks for the concern, my initial plan for this blog was to update at least weekly as well.

But guys, sadly too many things just caught up (I know excuses right, gotta admit am little lazy too)

Anyway, currently I'm working on a thesis titled:-

"The effectiveness of price stabilisation (greenshoe option) and Malaysia IPO performance" 

Will share my findings real soon.. so stay tuned :) 

pls don't leave =/

[Investment] Special Purpose Acquisition Company (SPAC) IPO

In tandem with the upcoming IPO of Reach Energy Berhad, a Special Purpose Acquisition Company (SPAC), this post attempts to address the lack of understanding on SPAC.

What is SPAC

• Basically, SPAC going for IPO is a shell company with no operation or income generating business raising fund from public to acquire operating companies or assets, known as Qualifying Acquisition (QA). 
• Below are the comparisons between a SPAC and an existing company going for listing:-

• Investment in SPAC has higher risk since the performance and financial of the business cannot be evaluated compared to existing company going for IPO. Thus, the key investment theme for SPAC is the experience of its management team to pursue the business strategy and complete QA.
• Currently, there are only three listed SPACs on Bursa Malaysia which are Hibiscus, Cliq Energy and Sona Petrolium. 
• According to The Edge (19 Dec 2013), the proposal to list two SPACs in the mining sector i.e Australaysia Resources and Mineral Berhad and Terragalli Resources has been rejected by Securities of Commissions due to the doubt of the returns would commensurate with the risk of investors.

SPAC Structure

• Investors in SPAC typically buy a unit of the SPAC shares (mother share) and receive a warrant which is only exercisable when the SPAC completed the QA. Both of the SPAC shares and warrant will be traded separately.
• A SPAC going for listing made up of three types of shareholders which are the management team, pre-IPO investors, and the IPO investors. Note: retail investors/ public are classified under IPO investors.
• The restriction and entitlement for each type of shareholders are as below:-

(Source: Securities Commissions)

SPAC is a high risk and high return investment. The completion of Qualifying Acquisition which is commercial and financial viable is the key success of a SPAC. However, in the event of a SPAC fails to complete Qualifying Acquisition within 3 years, the SPAC will be liquidated and delisted.

[Inforgraphic] Analyzing Initial Public Offering (IPO)

An initial public offering (IPO) is the first sale of stock by a company to the public and listing to the stock exchange.

Everytime there's an announcement of IPO, the retail (public) investors will be rushing for the application and place most of their money in the IPO. Most often the public perceived that all IPOs are good investment with many upsides since it is the first day of listing. But this is not always the true case!  Whether the IPO is priced at 10sen, RM1, or RM10 doesn't determine whether the valuation is cheap or expensive. IPO can be good or bad depending on the company position, valuation, financial, industry, intention of listing, and structure of the IPO.

Below are the inforgraphic on the key points that investors should analyze and understand before investing in an IPO, which can be obtain from the Prospectus. Always ask your broker for the IPO Prospectus (it's free) or retrieved it online from Bursa Malaysia. Yes it is a very thick book but it is definitely very useful information to evaluate an IPO.

*Click on the image to enlarge.

Stay tune, I will be explaining and blogging on the key points and how to make good use of the IPO prospectus soon.


Be a sound investor, be a diligent investor.