With the advent of online brokerage firms and the offerings of innovative companies like OnMarket BookBuild available to retail investors, households are increasingly being given access to Initial Public Offerings (IPOs) – that is, new companies seeking to list on the ASX.
The trouble is that the companies being offered through these channels are often unsuitable for the average household investor. Here's a brief overview of the three latest IPOs offered through Nabtrade, and my take on whether they're a good opportunity:
Broo Ltd (ASX: BEE)
The Australian brewer and marketer is raising funds to increase the marketing of its two beer brands, Broo Premium Lager and Australia Draft, with the money being used to increase marketing and fund increased market penetration of both beers. Broo has also played the China card, with a distribution partner in China and some funds earmarked for a Chinese rollout. The company has a long history in Australia, but despite that I don't believe it is investment grade. Broo is loss-making and there are key risks around uptake in China as well as the decline of the mainstream Australian beer market. With management owning 75% of the shares, investors won't have much of a voice and have no way to influence company decisions. I'd give this one a miss.
Antipodes Global LIC (ASX: APL)
The Antipodes LIC (Listed Investment Company) was created to provide global diversification, preserve capital, and generate returns on investment in excess of the MSCI All Country World Net Index (AUD). An attractive way to diversify your portfolio, investors must also take note that Antipodes has a limited operating history. Management has a strong investing record, and most of them are ex-Platinum Asset Management Limited (ASX: PTM) investment managers. Fees are a reasonable 1.1275% per annum, while the performance fee is 15% of outperformance. This is roughly in line with other fund managers. Of the three companies featured in this article, Antipodes is the one most suitable for a majority of investors, although investors should be sure to do further research on the company before applying.
Powerhouse Ventures Ltd (ASX: PVL)
Powerhouse Ventures is an interesting business, owning shares in a number of diverse, innovative New Zealand start-up companies. The intention of Powerhouse is to use its ASX listing to cross bridges (financial ones, in particular) that are normally closed to start-up companies and use this to drive their growth. Powerhouse will not generate much cash from its operations and the primary avenue to profit appears to be increases in the value of its shareholding as these start-up companies succeed. The word start-up seems to conjure Apple – or more recently Atlassian – fantasies of eventual multi-billion dollar success stories, but in reality there is only a long road, and no guarantees. I would consider owning shares in Powerhouse to gain exposure to the innovation industry, which is usually closed to household investors.
However, it's not suitable for more than a tiny, speculative part of your portfolio, and not for those for whom capital preservation is paramount.
