You can make money in the stock market through private placement. Get you private placement shares which are normally lower than the current share prices and sell it to make profit.
What is private placement? Private placement is non-IPO non-public offering issuing of shares to identified or selected group of investors. The investors are normally strategic investors such as suppliers, customers, institutional investors such as banks, insurance companies, unit trust and pension funds.
Merchant bank or investment bank will assist the company in the private placement, normally the total number of private placement shares is not more than 10% of the total company issued shares. The issue price is normally cheaper than the current share price.
In Malaysia
Private placement may also offer to individuals that are not strategic to the company. It can be anybody as long as you have a bit of connection.
From my observation, after the completion of the private placement, if I take a look at the annual report, there will be few individual names appear as substantial shareholders, in which I think they have no benefits to the company. I always feel that after they received the shares, many may sell it to take profit. Those who have not sold, and still holding it, I think they will then sell if they need the money. Their cost is low, therefore some prefer to sit on paper gain and no urgency to sell.
My question is this, how the company select who will be the purchaser of the private placement shares? And what benefits do these people bring to the company? If you look at the defination from a text book, it normally state strategic investors.
If the purchasers are suppliers or customers, then it will be good because it serve as strategic investors. If it is EPF or large unit trust, then is good as they can be a watchdog to the stocks.
If you are rich, why don’t you call up your investment bank friends and see how the shares is being allocated.
RISKS, LIMITATIONS OR DIFFICULTIES:
You may need connection in order for the shares to be allocated to you. I also want to know how, and I also want to be allotted. The quantity is normally in big block and you may need to have substantial money.
OPINION:
My opinion is that all these private placement should be allocated to strategic investors and not ordinary individuals.Please add my link to your blog.
For more info on 52 Ways of Making Money in Stock Market.
Private placements are a unique way to make money. You can frequently get access to deals that are not available to the general public. Plus, you also frequently can obtain investments in new, uncorrelated asset classes as well.
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