IPOs: Sorting the winners from the losers

Livewire Exclusive

Livewire Markets

The average return on new listings in 2017 was over 60%. Having some exposure can add to your returns, but there are plenty of landmines to avoid. Cyan is active in this market and Dean Fergie discusses their approach in this exclusive interview, including one recent listing that passed the filters.

 

Key points: 

  • One factor that is often overlooked by investors during the evaluation of a potential IPO investment is the use of funds. Preferably, capital raised is for expanding the business.  It is less desirable when capital is allocated for a financial purpose such as paying down an investor.
  • An IPO that recently passed Cyan’s filters is Pivotal Systems (PVS). This is a US-based tech business, in the semi-conductor industry. The majority of the $30 mil raised recently was for business expansion.
  • One that didn’t pass the filters was Marley Spoon (MMM). The company isn’t yet profitable, furthermore the ~$60 mil raised wasn’t sufficient to get the company to profitability either.
  • Evaluate private equity selldowns on each one’s merits. While the Dick Smith listing was a very poor experience for investors, other PE selldowns like Lovisa and Motorcycle Holdings have been highly profitable. 

Further Insights

Cyan is making meaningful investments in some of the most promising (and often overlooked) smaller companies listed on the ASX today. Find out how.


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