Source: Melbourne Investor Feb/March 2007

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Ground Floor Opportunities Elevated Profits

Source: Melbourne Investor Feb/March 2007

Written by Rick Leighton

BE Capital

Rick is the Managing Director of the BE Group of companies. Professionally qualified in law and applied finance, Rick has personally overseen the preparation of initial public offer documentation and best practice corporate governance programs for companies cumulatively worth more than $350 million.

 

Ground Floor Opportunities Elevated Profits

Did you know that if you had invested $5,000 in a start-up company called Microsoft, your investment would be worth around $45 million today? Or that $100 investment in Coca-Cola (before it listed on the stock exchange) would be worth more than $2.5 million now? Or that $1,000 invested in Amazon.com back in 1994 would sell for more than $2.4 million today?

What’s common to each of these examples is that the opportunities were not made available to the general public. At the time, these companies weren’t listed on stock exchanges and ‘ordinary’ investors never knew what they were missing.

When it comes to buying shares, the herd mentality is to only consider blue-chip ASX listed shares. But wouldn’t it be better to be one of those people who bought shares before the company decided to list? By the time a company is listed on a stock exchange, all of the early profit opportunities are well and truly gone, snapped up by savvy investors who understand the real value of information and had heard about the opportunity before anyone else.

Investing in ground floor opportunities can lead to extraordinary returns but very few people understand the process enough to make this part of their investment strategy. Take the next few minutes to learn how public offers really work and you may never pay retail prices for company shares again.

How public offers work

An Initial Public Offer (IPO) occurs when a company first makes its shares available for purchase by members of the public. While the company may list on a stock exchange at this point, it doesn’t have to.

Public offers are normally structured as one of the following offer documents – a Prospectus, an Offer Information Statement (OIS) or a Class Order Compliant Offer Document (COCOD). A COCOD is issued under a specific Australian Securities and Investments Commission (ASIC) Class Order and must meet the stringent disclosure requirements demanded by ASIC for the protection of investors.

Many ground floor opportunities are structured as Class Order offers. Because the capital raised is usually employed to achieve immediate goals and lay the foundation for future growth and profits, it is the early investors with the greatest potential to profit handsomely from the company’s success.

These ‘pre-market’ offers are always made available on a first in, best dressed basis and can only ever be made available to a maximum of 20 investors; usually the first 20 to hear about it.

What most ordinary investors think is the beginning of the investment opportunity – a stock exchange listing – is actually the final step in the process and occurs once all the early profit opportunities are well and truly taken. While the first opportunity that ordinary investors get to buy shares is at Round 4 (Prospectus stage), investors that entered in early have already made a nominal gain of 900 per cent. And that’s before the company thinks about listing on a stock exchange!

Investing at the real ground floor level in high-potential companies takes a little more effort and due diligence than buying blue-chip shares at retail prices. But isn’t a little extra effort justified once you understand the process and recognise that ‘early investing’ can generate exceptional rewards?

Now all you need is a way to access timely information on exciting investment opportunities before ‘ordinary’ investors hear about them.