Corporate giants cheated poor investors

dineshfernando · 1 Corporate giants cheated poor investors Sun Jun 03, 2012 1:20 pm

dineshfernando

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Sometime back we had many IPOs flooded the market without giving any break for the investors.
If you analyze their IPO prices and present earnings it's really shocking that they would have artificially manipulated the earnings just before the IPO in order to get investors to invest.

Eg: SHL - Softlogic Holdings PLC
If we calculate the PE based on the IPO price of Rs. 28/=
EPS for 12 months ended 31/03/12 is 0.66 cents.
PE = 28/0.66 = 42 times

This shows clearly that Ashok Pathirage robbed the money of many poor investors by selling SHL share which is worth Rs. 8/= for Rs. 28/= by making super abnormal profit.

This is the best example how rich steal money from poor with the help of SEC and other influential.

Many more examples: FLCH, VONE, PCH, EXPO and many. All were extremely overvalued if you compare their present earnings with the IPO price. What a crime these corporates have committed. Most of the companies haven't used the IPO money for intended purposes. Where is PCH call center? Where is FLCH hotel?

I seriously think that SEC and CSE should play an active role in determining the IPO issue price. They should scrutinize the past 5 years financial statements and make sure the IPO price is not overstated. E.g. If the sector PE is 12 then it should be valued at least at 20% to 40% discount.

What a way to cheat these poor souls?

The Alchemist · 2 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 2:35 pm

The Alchemist

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Everything appears 20/20 in hindsight. i think perhaps its a bit unfair to hold Ashok Pathirage solely responsible for the SHL price fiasco. He never held a gun in his hand and said Buy! In fact, as i understand, he was buying heavily between 20-29 when price was collapsing due to the private placement beneficiaries selling at huge profit. he too obviously did not have the hindsight to predict price would collapse to this level. The Brokers and Promoters should be held culpable. They should have done due diligence on forward earnings expectations, past profit, earnings multiples, private placement price and implications etc and advised the "poor investors" not to subscribe. In bull markets, greed blurs rationality. ultimately, the idiom Buyer Beware is apt in equities markets. In hindsight and in a bear market, it is very easy to look for scapegoats for market downturns or corporate failures. nobody talks of having foresight due to the greed factor in bull markets.

Rizmi · 3 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 5:37 pm

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I dont invest in IPOs.. I wait till the share hit the market and for few days to monitor the performance..
This has helped me to gauge the stock..
This is my personal view..

Kithsiri · 4 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 9:17 pm

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dineshfernando wrote:I seriously think that SEC and CSE should play an active role in determining the IPO issue price. They should scrutinize the past 5 years financial statements and make sure the IPO price is not overstated. E.g. If the sector PE is 12 then it should be valued at least at 20% to 40% discount.

I think Mr Fernando got a very valid point.
Unfortunately, the question here is are them empowered and or willing to go that distance.

Slstock · 5 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 9:41 pm

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dineshfernando wrote:I seriously think that SEC and CSE should play an active role in determining the IPO issue price. They should scrutinize the past 5 years financial statements and make sure the IPO price is not overstated. E.g. If the sector PE is 12 then it should be valued at least at 20% to 40% discount.

We would assume and trust for SEC to check on these things before they give OK. That what SEC should be there for to protect the share holder interests ( mainly retailer) . But are they doing their job is questionable with issue like this,. Looks like this is happening USA also with Facebook IPO

Redbulls · 6 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 9:58 pm

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slstock wrote:

dineshfernando wrote:I seriously think that SEC and CSE should play an active role in determining the IPO issue price. They should scrutinize the past 5 years financial statements and make sure the IPO price is not overstated. E.g. If the sector PE is 12 then it should be valued at least at 20% to 40% discount.

We would assume and trust for SEC to check on these things before they give OK. That what SEC should be there for to protect the share holder interests ( mainly retailer) . But are they doing their job is questionable with issue like this,. Looks like this is happening USA also with Facebook IPO

Plus the Auditing company which is certifying the accounts also answerable no?

UKboy · 7 Facebook IPO ( Just a reminder) Sun Jun 03, 2012 10:18 pm

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Does anyone calculate the trailing PE ratio of facebook?

Well, Now We Know What Facebook's Worth—And It's Not $100 Billion

Read more: http://articles.businessinsider.com/2012-02-02/tech/31015874_1_facebook-ipo-stocks-valuations-matter#ixzz1wkViogNH

None of us should not take these IPOs too seriously (my personnel idea). If you think its worth then go for it if you have any doubt just leave it.

sapumal · 8 Re: Corporate giants cheated poor investors Sun Jun 03, 2012 10:39 pm

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dineshfernando wrote:I seriously think that SEC and CSE should play an active role in determining the IPO issue price. They should scrutinize the past 5 years financial statements and make sure the IPO price is not overstated. E.g. If the sector PE is 12 then it should be valued at least at 20% to 40% discount.

SEC should not involved in pricing IPOs. If they involved that will cause more problems. They will use it to achieve money for them or political things.
Best thing is introduce a standard for IPO. The IPO should come with compulsory reports. auditing company opinion, 5 year summary , ....

PGCR · 9 Re: Corporate giants cheated poor investors Mon Jun 04, 2012 6:09 am

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What SEC can do is making Third-party independent valuation report mandatory on value of the entity.
In a company buy back of shares they used to post this suggested Third-party independent valuations report to make it more reliable. Why not in IPOs as a appendix to the prospectus?