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well i figured since the comment section here is going bazonkers, and since it was a long ass reply i figured i might as well make it a post 😛

Q:

1001Nights Says:
May 17th, 2007 at 12:56 pm

This is completely off topic but since I know from older posts that you’re involved in the stock market I wanted to ask you something about investing in a pre-IPO in KUWAIT and hope you can help. If the company that plans to be listed is a privately owned enterprise and not a newly established government-owned company, don’t you have to be INVITED to the pre-IPO? And if so, don’t they usually ask you for well over KD 5,000 (unless maybe you’re family or friends with the current owners)?? I am asking because it’s a short topic of discussion here: http://io81.com/?p=291#comments

What do you think?

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somekindoflongwinded A:

youre right 1001.

typically, said company will have someone like nbk capital or global who will be in charge of getting the company listed. and typically, those guys will want to deal in decent sized units of millions of shares. sometimes the smallest unit is 1 million shares which even at a tiny 30fils/share price adds up to what alot of your peole cant afford/risk.

normally those big chunks will go to friends of the current shareholders and nbk capitals high roller clients, individuals and other investment companies. if theres anything left over that will get offered to the public.

suppose youre limited to kd5,000 you still can get in on the action, but its a different kettle of fish. after the shares are allocated to everyone, a grey market appears, where preIPO shares are traded. if you head over to souk al jat you’ll be able to get just about anything you want,… for a price of course.

here also they deal in units, but you might get lucky and find the smallest being 100,000shares. sometimes it remains in the million bracket.

the danger of souk al jat is that these days youre not allowed to transfer the ownership of shares before IPO, unless youre a direct blood relation, and we’re talking father-son, not third cousin twice removed as alot of people are here 😛

so if you do decide to go in on a souk al jat deal, chances are you’ll have to get a bunch of other people so that between you, you all make up the minimum unit of 100,000 or million shares.

the risk is that the guy who owns it on paper might sell and retire in the bahamas before you can call the cops. but souk al jat has been arround a long time and i dont think anything really bad has happened like that yet….. other than the whole souk manak fiasco which is kind of how souk al jat still functions like.

and yes if you know someone you can go thru the legit way with global/nbk and have a friend allocate a smaller amount for you. again you gotta trust that guy.

i have done this a couple of times which is how i got a hold of ‘kuwaiti only’ stocks at IPO. but as i said we have some old trusted kuwaiti friends here, and the IPO’s were solid companies which we had done research on.

having said that, back then, you could simply transfer shares from one person to another, unlike today where deals have to go thru the exchange.

one other option is to own the shares of a company that has a lot of little companies under it. sometimes they will spin it off and you as a share holder will get for example 1 new company “x” share for every 3 parent company shares you own. sometimes its free, sometimes theres a charge per share. but as shareholder you get it at a discount compared to other people later. then just wait for it to get listed.

the problem with IPO’s is that theyre an unknown quantity. just cos the preIPO price was 115fils doesnt mean that the comapny is actually worth that much, it could be more it could be less. so its really up to you to decide and do your homework on what is a decent risk to take or what isnt.

with companies that have long histories being public, thats not the case as much. altho there are one or two bad apples out there. then again there are also some absolute gems that have been overlooked, some of which are trading at or even below what they are actually worth, which is actually a better deal than an IPO.

but thats not to say that IPO’s are bad and evil and yu should stay away from them. as with anything, if it fits your risk profile and its something you enjoy then yeah you’ll be great at it.

i know good IPO traders, options traders, forex traders, futures traders, commodities traders, etc, and theyre good at what they do andthey dont stray from it. we all have to learn that lesson the hard way tho. and its no fun realising youre not cut out to be a forex trader. but its great knowing i rock as a listed share trader 😀

seems like a long answer i know but i dont like giving half ass answers, especially when the question ties into alot of other questions.

my email is on my about page so feel free to ask anything you want. i’ll be more than happy to help if i can.

oh and as for being a tiny individual trader competeing with the big institutions, dont worry about it. just like any fight, the smaller ones are normally quicker and more agile while the larger ones trip over themselves. there are advantages to being an indie trader that allows one to outperform any index or “professional” and warren buffet is proof of that, hes squirreled away 64 billion with a staff of just 12 people. i’ll bet globals cleaning staff alone are more than 12 😛

buffet once said “wall street is the only place that people are driven to in their rolls royce to take advice from people who commute to work on the bus”.

as i said, this aint rocket science or brain surgery 😛

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6 Comments

  1. Thank you for taking the time to give such a thorough answer. I really appreciate it.

    Now, I’m curious, by how much did you beat the market, say last year? 😀

  2. by 30%, or more actually if you want technically “beating the market”. i just know i did 30% in a year when the market sucked and funds were all negative 😛

    but shhhh dont tell no one 😛

  3. Well done, Skunk, both personally investment results and this great and helpful and highly readable post.

    And I am beginning to understand about the GAS mask.

  4. hehe cheers xpatr, spreading the knowledge is my modest way of giving back, especially when its something that i really do believe everybody can do and should have an interest in if they want to retire comfortably.

  5. Hi Jim. Photos i received. Thanks


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