Public Offer Factors
There are some Public offer factors that you have to consider before investing in an Public offer (PO, IPO and POP)
Here are some public offer factors which are necessary to ascertain the viability of a Public offer and enables you to know if to invest or not.
- What will your invested fund be used for: Is it going to be used for development/expansion project that will yeild more returns? Or is it going to be used for debt servicing?
- Indebtedness: This is very important because, if the company is highly in debt or if the financial condition of the company is not reflected in the balance sheet. It can really turn out to be a serious problem to investors since such invested fund could end up being sunk into debt payments.
- Percentage of subscriptions: This is important as it speaks about the investing public's interest and confidence in the stocks of the firm, their confidence in its future performance and its performance after the IPO.
- Financial position of the firm: What is the share capital and reserve of the company. What is their authorized share capital? Do they have reserve? and how large is their reserve? Because this likely determines bonus issues and dividend declaration.
- Financial summary: This helps you to study the company's financial history and growth rate for a number of years.The financial summary includes Gross earnings, profit before tax, profit after tax, share capital, net assets, dividends, earnings per stock, and dividends per stock.
- Future prediction or forecast: This helps you to predict the company's performance. Future predictions must be computed with financial history in order to prevent exaggeration. In addition to the financial summary, forecast earnings yeild (this is what the offered stock price will yeild when invested) is used to calculate future forecast.
Here are some more Public offer factors to consider:
- Subsidiaries and associated companies: For the purpose of business stabilization this enables you to know whether your investment is on a thin rope or not. Diversification is a major ingredient to the growth and security, because earnings will be generated from subsidiaries and associated companies to boost the profit margin of the parent company.
- Historical background: The history and business of the the company right from inception should be well studied. It is important to know the changes and developmental phases of the company, track records of its board of directors, how the company was started, they company's relationship with clients, clients and the society in general. This information can be obtained in business sites online.
- Board members: What is the track records of the board members? The better the track records and experience of the board members the better and more secure is your investment.
- Legal matters: You must cross check that the company does not have legal or court case that may lead to its closure, liquidation or even bankruptcy. There are known cases where litigation concerning board members, investors or even rival companies has led to the closure, liquidation or even bankruptcy of the company.
There are many other Public offer factors that you have to consider also making use of the stock market information to to ascertain the viability of a public offer.