Watched the Tellworth presentation at Mello last week and I'm considering it as a option. Hopefully they can find some value and recovery plays that i don't have the time or conviction to find.
What's the pros and cons from buying at IPO? Rather just in the market. Would be interested in others thoughts or other suggestions to look at?
I’d wait to buy in the market with this. Considering The makeup of the security and current market conditions I’d argue you’d be buying at a premium on the initial offering price. DYOR of course however that’s my take, I’m considering this myself
Most UK Investment Trusts end up trading at a discount to NAV, sooner or later. The median discount to NAV is about 9.8% at present. Out of 441 UK trusts for which I have data, 373 trade at a discount.
Of the 14 ITs I have held for more than 5 years, 13 have outperformed a relevant benchmark etf that I selected, measured from the purchase date (varying from 2007 to 2015). Despite that, only one of them trades at a premium to NAV.
Trusts trading at a double digit discount include FEET and JEO.
So to buy a trust at IPO, with no discount to NAV, I would have to be convinced the management are outstanding.
The alternative is to buy existing trusts, where the managers have a superb long term track record and still trade at a discount.
Almost all fund managers present well, so that's not a reason to select one for me.
Is there another really good reason to buy this IT at IPO ? As always, I have an open mind.
The way i was looking at it is they have a blank piece of paper to start from. Where as other IT will no doubt be holding company's that the wouldn't necessarily be a buyer but are stuck holding.
The discount to Nav is a fair point suppose it depends on your outlook for the next couple of years.
Regarding the managers i under stand they did a good job when at Schroders.
Michael.
Unless the marketing is very effective or the Fund Managers have a previously successful record, so that the Trust has a chance of going to an immediate premium, there is no advantage in buying a New Trust. It’s quite likely to go to an immediate discount, and so cheaper to buy in the market once the Trust is listed.
Investment Trust Managers know this is a problem with new issues. That’s why in the past they often used to offer (for free) warrants as well to make it tempting to buy ahead of the IPO. But warrants have, sadly, fallen out of favour so for now Trusts are no longer issuing them. The warrants themselves often became fabulous multi bagging winners....so great if some were handed out for free (usually on a 1 warrant for every 5 shares applied for) in that initial offering.
I haven’t even looked at Telworth so have no idea beyond the negatives in this post whether it might be worth going for it.
The new Buffettology Smaller Companies IT run by Keith Ashworth-Lord will also IPO this month. It has a novel way of protecting against discounts building up by having an "Exit Opportunity" after 5 years and then every 3 years, where the company will buy your shares for the NAV at that time.
All the best, Si
You would avoid spread and commission (and maybe stamp?) by buying now which may equal a couple of %
Although rare some IT's e.g. Smithson took off very well and I don't remember it ever trading at a discount or below the IPO price. ( Just had a look and it did dip below £10 in March)
You may experience a warm satisfaction of supporting an IPO with new money as opposed to buying in the secondary market. But you probably wouldn't. Especially when it's an IT who in turn just buy stocks on the secondary market.
Looks like it's been pulled.
https://www.investegate.co.uk/...
Presumably it failed to get to £75M
I think it's a shame but I'll direct a bit more to Buffetology IT now.
Its not novel. Many ITs have discount control mechanisms. Buying at IPO is silly. There are so many decent trusts at a discount.
Hopefully it will be as silly as buying Smithson at IPO.
(Now discussing Buffetology not Tellworth)
Hopefully it will be as silly as buying Smithson at IPO.
Yes, I feel such a bloody idiot for putting £30k into the Smithson IPO. Every day I really beat myself up about it. - wish I'd bought more!! :-) If only I was as clever as some others who can predict when discounts will be available. It's as if you have to go all in on day one and never buy in the secondary market...
All the best, Si
I was at a seminar this morning run by the Association of investment companies where one speaker argued that IPOs were terrible, as investors paid the cost of them, and so typically ended up with 98p of assets for every £1 subscribed. He said that as the manager, administrator, lawyers etc effectively took annual fees from each investment trust in perpetuity, they should pay the cost of its launch. An interesting comment I thought.
