Black investors will get a chance at investing in an initial public offering (IPO).
Last week a company called Transcend Property Fund opened its business for subscription by the public, where individual investors were invited to buy 10% of the company's shares.
Transcend is a property business, which builds residential assets and rents them out to the lower-to-middle income market.
They are responsible for building flats around the country, such as the ones near Jabulani Mall in Soweto.
For the first time in a long time, investors got to buy into an IPO, and put their own money without any special discount of any sort, such as a BEE discount.
The share comes with a discount of 27.5% to what the business is valued at according to management, via a method called the net asset value.
This was mostly due to the fact that the share may not trade actively in light of the small total size of R500-million, which is majority, 90% held by its founding company.
However, with the stock offering a distribution yield of 8%, before the price was discounted, investors should make returns above nine percent per year if the business does well and continues to issue distributions as per their projections. The investors that got the opportunity obviously will be happy to get such returns, but must take into account the following:
l They need to have a long-term view of the investment;
l They will experience periods of both good share price performance and downward moves in the share price over the period the company is listed;
l The company will also bring in about R2-billion in further assets in the next three odd years and the current shareholders may be given a chance to buy into the scheme through a "rights offer", which will allow them, as existing shareholders, to buy the shares before anyone else gets a chance to do so;
l They must guard against over-exposing themselves to the same stock, since they can always chose to buy more shares post the listing. They should make sure they buy other unit trusts to diversify their portfolio as we have discussed on this column before; and
l They are also responsible for making sure that they follow any news announcements out from the Johannesburg Stock Exchange about the stock's performance, this is what all shareholders do in the market if they own stock.
It is important to note that such IPOs are rare, and therefore the idea behind them is still confusing, but the prospects, should the business be run well, are good for the long term investor.
We will keep looking out for similar opportunities in future to share with those looking to participate in such higher-risk investment, but prepared to take the responsibility for the volatility these investments bring to their overall portfolio.
The company lists on Thursday.
Should you want to invest on the JSE, please call Inkunzi Wealth Group on 087-160-0018 or e-mail us on trading@iwgsa.co.za
Grab yourself a slice of kasi real estate
Black investors will get a chance at investing in an initial public offering (IPO).
Last week a company called Transcend Property Fund opened its business for subscription by the public, where individual investors were invited to buy 10% of the company's shares.
Transcend is a property business, which builds residential assets and rents them out to the lower-to-middle income market.
They are responsible for building flats around the country, such as the ones near Jabulani Mall in Soweto.
For the first time in a long time, investors got to buy into an IPO, and put their own money without any special discount of any sort, such as a BEE discount.
The share comes with a discount of 27.5% to what the business is valued at according to management, via a method called the net asset value.
This was mostly due to the fact that the share may not trade actively in light of the small total size of R500-million, which is majority, 90% held by its founding company.
However, with the stock offering a distribution yield of 8%, before the price was discounted, investors should make returns above nine percent per year if the business does well and continues to issue distributions as per their projections. The investors that got the opportunity obviously will be happy to get such returns, but must take into account the following:
l They need to have a long-term view of the investment;
l They will experience periods of both good share price performance and downward moves in the share price over the period the company is listed;
l The company will also bring in about R2-billion in further assets in the next three odd years and the current shareholders may be given a chance to buy into the scheme through a "rights offer", which will allow them, as existing shareholders, to buy the shares before anyone else gets a chance to do so;
l They must guard against over-exposing themselves to the same stock, since they can always chose to buy more shares post the listing. They should make sure they buy other unit trusts to diversify their portfolio as we have discussed on this column before; and
l They are also responsible for making sure that they follow any news announcements out from the Johannesburg Stock Exchange about the stock's performance, this is what all shareholders do in the market if they own stock.
It is important to note that such IPOs are rare, and therefore the idea behind them is still confusing, but the prospects, should the business be run well, are good for the long term investor.
We will keep looking out for similar opportunities in future to share with those looking to participate in such higher-risk investment, but prepared to take the responsibility for the volatility these investments bring to their overall portfolio.
The company lists on Thursday.
Should you want to invest on the JSE, please call Inkunzi Wealth Group on 087-160-0018 or e-mail us on trading@iwgsa.co.za
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