If you're ever wondering what an IPO is and how it can be a good investment opportunity for you, then read the simplified information in this article.
One of the things that I like in my banking career is that I’ve gained a
lot of knowledge on how the activities of businesses affect the country’s
economy. Take for example an initial public offering or what we commonly
hear in the news as IPO. While it may not be relevant to a lot of people,
it’s still good for us to have an idea, or at least an overview, of what an
IPO is. That way, we don’t get lost in a flurry of alien terms when we read
the business section of a newspaper or listen to economic news on TV.
The 5 Valuable Lessons From FILRT’s IPO Issuance
What is an Initial Public Offering (IPO)?
An IPO is an activity in which a company sells its stocks or shares to
potential investors, which can be other businesses (corporate) and individuals
(retail), for the first time. It’s an exercise to raise capital to expand the
business. It's also called "going public" because you are inviting outside
investors to put capital (or to invest) into your company.
 |
| Photo by Anna Nekrashevich from Pexels |
As such, an IPO is worth celebrating because it means that there is
flourishing economic activity. More IPOs mean more companies are expanding
and, therefore, there is a brighter economy ahead.
Why is that? I won’t go into many details but just point out the two specifics
that are relatable for us. One, expanding companies hold the potential to
generate more jobs for more people. And two, an IPO is a good investment
opportunity for us individuals.
You can actively trade stocks and earn income when you sell them. You can also
choose to keep the shares and give them to your children if you are a parent
like me. I know a lot of parents invest their money not for themselves but for
their children, which should be the usual case. Stocks are stable investment
options that you can add to your family’s financial instruments.
An IPO is usually announced in newspapers and even on social media pages these
days. Just watch out for these announcements to get details on how to buy a
company’s shares but these are just usually through stockbrokers. If you have
an account with a stockbroker, like in COL Financial, you can buy stocks
through the dashboard.
An IPO amid the pandemic
An IPO is something that you would not usually expect in a pandemic when
businesses are either tightening their budgets, downsizing operations, or even
closing shop. However, some companies were able to buck the trend,
so to speak. It’s a good indicator or encouraging news that we should be happy
about.
Take for example Filinvest REIT Corp. (FILRT), which made a successful debut
on the Philippine Stock Exchange (PSE). last August 12. It was a time when NCR
Plus was placed under Enhanced Community Quarantine or ECQ once again. Its
share price continued an upward trend and settled at 3% above the initial IPO
price on September 27.
What does that mean? It simply means that investors are confident that FILRT
will do good in its business. Investors are convinced that FILRT has a big
likelihood to grow. In buying stocks, that’s what you also have to look out
for. The higher the stock price, it's almost certain that the company is more
profitable.
In fact, FILRT Chairman Josephine Gotianun-Yap dubbed it “the bravest IPO,”
having made history as the first REIT IPO to be listed during an ECQ.
“It is a vote of confidence not only in our company and this new asset class
but also in our country and in what has proven to be a most resilient industry
in our economy: the BPO sector,” she said in her speech during the IPO listing
ceremony, held virtually for the first time by the PSE.
What valuable lessons can we get from this IPO listing?
FILRT’s courageous debut in the stock market actually holds many valuable
lessons for investors. The knowledge that we can gain from this IPO can be
beneficial for us as we move through uncertain waters in this pandemic.
 |
| Photo courtesy of pexels.com |
Here they are:
1. Quality over quantity
I think most of us were often told by the people around us, especially those
who are older than us, to be more attentive to the quality of our work over
the quantity. That’s pretty much self-explanatory because we all want a
product that does the job well instead of something subpar.
“While the reception was mixed, there were investors who responded favorably
to the REIT as they focused more on the quality of FILRT’s assets and the high
yield of the stock based on its IPO price,” said April Lee Tan, chief equity
strategist at leading stockbroker COL Financial Group. The “strong enough
demand” for FILRT comes from its good assets and attractive valuation, she
added.
FILRT’s portfolio consists of 17 Grade A office buildings totaling over
300,000 square meters of gross leasable area (GLA).
Of these, 16 of the 17 buildings are in Northgate Cyberzone in Filinvest City
in Alabang, a PEZA Special Economic Zone, and IT park while another building
is located in the gateway of Cebu IT Park in Lahug, Cebu City. The assets were
valued by an independent appraisal company at ₱48.5 billion.
Based on the IPO listing price of ₱7.00 per share, FILRT projected a dividend
yield of 6.3% for 2021 and 6.6% for 2022 — higher than the yields of the first
two publicly listed REITs.
Less than a month since its successful maiden share offering, FILRT already
declared a cash dividend of P0.112 per outstanding common share to
shareholders as of record date Sept. 15, 2021. The amount is equivalent to a
quarterly yield of 1.6% or an annualized yield of 6.4% — slightly higher than
its projected dividend yield for the year.
2. Always be mindful of sustainability
Sustainability and green living are buzzwords that we often hear these days.
In fact, the green movement has been ongoing for many years now. It’s also a
fact that many people prefer to support brands that have concern for society,
animals, and the environment.
FILRT differentiated itself as a “green” or sustainability-themed REIT as its
portfolio includes two LEED Gold-certified office buildings and 16 buildings
are in Northgate Cyberzone in Filinvest City in Alabang, the first central
business district in the country and the largest in Southeast Asia to receive
Gold Certification from LEED® v4 for Neighborhood Development Plan.
The buildings are cooled by the country’s largest district cooling system that
reduces carbon emissions and energy consumption, the result of Filinvest’s
partnership with Engie, a world leader in developing sustainable technology
solutions.
These sustainability features resonated well with investors, particularly
those adhering to Environmental, Social, and Governance (ESG) principles of
investing, said Maricel Brion-Lirio, president of FILRT.
3. Investing for the long haul
When we invest, we should always think long-term. That's because the longer
our money is invested, the higher the possible income.
 |
| Photo by Anna Nekrashevich from Pexels |
The highest share of demand for the FILRT offering came from so-called
“long-hold investors” attracted by the yield and growth prospects of the
REIT.
In particular, Gotianun-Yap said there was strong domestic demand from
qualified institutional buyers (QIBs), especially among insurance and bank
trust accounts who are “considered more sophisticated investors who look at
the long-term potential of an offer.”
Some of these long-term considerations are Filinvest’s established
relationship with its tenants, as well as the growing importance of Alabang as
a market, added Ms. Tan
4. Retail investors are the market’s saving grace
It’s really encouraging to know that many individuals are becoming savvier
when it comes to investing their money.
While FILRT’s offering mostly drew institutional investors, it was also
well-received by more than 8,000 retail investors, one of the highest among
REIT and IPO listings since 2020.
According to the recently released Stock Market Investor Profile report of the
PSE, retail investors now account for 98% of the nearly 1.5 million accounts
in the stock market while institutional investors owned 2%.
“Compared to 10 years ago, there are now a lot more sophisticated Filipino
investors who know how to distinguish good-quality companies and who invest
for the long-term,” said Ms. Tan of COL. However, she said there is still “a
lot of room for improvement” as less than 2% of the population are currently
investing in the stock market and taking advantage of attractive investment
opportunities.
5. Relationships matter
In life, it’s good to have reliable people around us; they can be our friends,
colleagues, or business partners. They can help us, even via a piece of simple
advice, when we have projects that we want to venture into.
 |
| Photo by energepic.com from Pexels |
FILRT relied on reputable investment bankers, both local and foreign, to make
its IPO successful. BPI Capital Corporation and UBS AG Singapore Branch served
as the Joint Global Coordinators and Bookrunners for the offer (with BPI
Capital also acting as the Sole Local Coordinator and Local Lead Underwriter),
UBS AG Singapore Branch was the International Bookrunner, China Bank Capital
Corporation as Local Lead Underwriter, while First Metro Investment
Corporation and SB Capital Investment Corporation were Local Co-lead
Underwriters.
“We were thrilled to have assisted our long-time client Filinvest in the
historic listing of FILRT. The high demand from both domestic and
international investors during this time of volatility in the international
equity markets speaks to the consumer and investor confidence in Filinvest’s
properties as well as the attractiveness of sustainable investments in the
Philippines,” said James Grandolfo, Global Capital Markets Group partner of
the Hong Kong-based Milbank team which advised FILRT on the offer.
“Our IPO was the culmination of months of hard work, but it’s just the
beginning of our journey,” said FILRT president and CEO Maricel Brion-Lirio.
“After this experience, we can now collectively write a book on ‘How to Do an
IPO in the Time of a Pandemic’.”
Epilogue
If there is one piece of financial advice that I’d tell other people, it’s to
invest their money. Investing in stocks is a wise move but I understand that
not all people have the extra money for buying a company’s shares.
Nonetheless, there are many investment opportunities out there that are within
your budget such as insurance that allows one to earn dividends, time deposit
products for those who are not keen on taking risks, and even GCash has
GInvest that allows individuals to invest as low as P5,000.
If you are serious about investing, all you have to do is to look around you.
Do your research, watch the news, read up, and even visit the social media
pages of financial companies. We need to be prudent in managing our money,
especially during this pandemic.
PIN THIS POST
Other similar stories:
This post may contain affiliate links, including those from Amazon Associates, which means that if you book or purchase anything through one of those links, we may earn a small commission but at no extra cost to you. All opinions are ours and we only promote products that we use.
 |
Great tips about investing in IPOs. I always keep an eye on it right when it drops, like the Coinbase IPO it when up a bit and then tanked big time. Glad I didn't wind up buying when I initially was going to.
ReplyDeleteI learned something new about IPO. I also agree n the buy hold sell part. I remember buying company stocks at a discounted price and after a year or so was able to sell at a much higher price. :D
ReplyDeleteThis is a great post for startups looking to go the IPO way. Thanks for the detailed post.
ReplyDeleteThis is definitely not my strong suit, and it is interesting to learn more about IPOs and more.
ReplyDeleteThe finance market sometimes really confuses me so this is helpful. I know I once bought one stock accidentally thinking it was another...you live and you learn!
ReplyDeleteThese are some really good tips on investing in IPOs.
ReplyDeleteI used to work in Banking many moons ago, still feel comfortable with the terminology but not much trust right now in the market in general. What I am interested in gaining more knowledge about is both bitcoin and CBD stocks as investments, what are your opinions of those?
ReplyDeleteinteresting.. how I wish to have time understanding stock market..
ReplyDeleteInvesting for long term has been the best advice I received. You're right, the longer we invest our money the higher value it gets
ReplyDeleteI have been thinking of investing lately. It would be nice to have a cushion to fall back on if we needed it.
DeleteGreat investment tips, you explained it very well and sure it will help people who will invest.
ReplyDeleteFransic - https://www.querianson.com
This may not be my forte,but we need to learn about this ! Excellent on how it was detailed and comprehensive information
ReplyDeleteI've been wanting to learn about this. I am planning to invest my money. Thank you for these tips
ReplyDeleteWhile i do not know much about insurance, it is so nice to learn morw about IPO and how it works. I am so glad that despite the pandemic, we can still see some light and companies like FILRT still prosper. Also, i really want to know more about investing to stocks.. I have friends who are into it and i am really intrigued how this works
ReplyDeleteIPO sounds like a great option. Nevertheless, I've invested my money pretty conventionally since I had some major problems with investments in the past. But it's always good to hear about further options.
ReplyDeleteGreat informative article. I had a different IPO in mind. Hmmm... I learned a lot!
ReplyDeleteThis blog is very informative and such amazing.
ReplyDeleteThank you po for sharing.
Very helpful for those who are planning to invest this may help a lot.
There's no better time to buy as much stock as the day of the IPO launch! Kudos to those who did and are still buying.
ReplyDeleteThank you for sharing this Tips for financing, very informative very helpful to us for planning to invest money
ReplyDeleteGreat tips about investing in IPOs.
Yes to all these, but there's more to investing to learn also. We started late and we were so enthusiastic, we made some really unwise investments that we lost. But no worries because our mantra is, as long as we breathe, there is hope. :) We will just be faithful in what investment we can afford at the moment as we continue to try to expand our income and create more passive ones, so we can invest in the big ones we're aiming for.
ReplyDeleteThanks for sharing this po , very helpful and informative tips to invest in IPOs. 😍❤️
ReplyDeleteBy investing in an IPO, you can enter the 'ground floor' of a company with a high growth potential. An IPO may be your window to rapid profit in a short time period. It may also help grow your wealth in the long run.
ReplyDeleteThanks for sharing with us your expertise. I have not much idea about IPO and stock market. Reading your post gives me a lot of idea on investing.
ReplyDeleteI don't have much knowledge about IPO, this blog is a nice guide. I like that I learned a lot from this. I agree that we should make some investments.
ReplyDeleteI never knew what an IPO was and you explained it in a very simple way! Thanks for this very informative blog and i hope to be smart enough to actually invest my money in something worthwhile.
ReplyDeleteFirst time to hear about IPO and mukhang interesting siya. Will check this out, pag-aralan ko muna hehe
ReplyDeletethank you for sharing. i didnt know na ok pa din some stocks even during this time. ive always wanted to try it out, sabi ko nga one day pag me extra na ako. gusto ko matuto mag stocks. baka sakali lang naman. is it now the right time to do this? lalo na now na we are on our wat to normalcy, so near yet so far, but we know we are almost there...
ReplyDelete