Public Offer Vs Secondary Market

[ghm]

I am just wondering whether it pays to invest in Public offers or buy at the Secondary Market. I have got my money tied down unnecessarily by Our so-called Public offers in Nigeria.

e.g. I did not receive my Union Bank Certificates till after (about) a year. If I had bought UBN in Jan 2006 at the secondary Market at N25.95, I would have turned the money around severally instead of buying a PO at N 20 and having to wait for 12 months.

What do you think?

[paragon]

Well, it's more of a personal thing. the only difference is that you do not need to pay brokage fees when buying an IPO. on the other hand, you would be required to pay brokage charges if you are buying from the secondary market.

For convinience, it's more advisable to buy from the secondary market, because the time it takes to get the certificate is very crucial. a stock can rise or fall during the period you are waiting for your certificate and as such you are at a higher risk of losing money both ways.

in other words, if the prices rises and it;s advisable to sell, you would not be able to do so due to the absence of the certificate and as such, you loose money. Also if the price of the stock drops during the waiting period, you would also not be able to sell and as such you loose money.

The other advantage with IPO's is that they are usually at discounted prices but that is not enough reason compared with what you have to gain or loose.

[ghm]

I tried to do some more analysis and discovered that we need to tread cautiously,

There is no commission involved in the public offer but in the secondary market, you have to pay commissions when you buy and when you sell.

The current commision is btw 2.25 and 4.25 % depending on the broker making 4.5 and 9 % both ways.

It requires a serious consideration to prefer a Seconday market to Public offer.

[Stockbear]

@ ghm

The difference you pointed out has always existed, however are you saying you only intend to buy from the primary market? If your answer is yes, then it means you will be excluding yourself from a lot of good deals.

How else will you take advantage of the many good offers mainly available in the secondary market? Public offers come but once in a while, so all this is dependent on ones investment strategy.

[ghm]

Yea you have a point, my consideration is only for stock where we have both simultaneously. like UBN, Zenith, Crusader, Intercontinental in 2006.

[c kenneths]

Most of the big deals done in the stock market are carried out in the secondary market. I see the primary market as a market for beginners, who will later find their way to a broker to do secondary market deals. The charges are necessary because the stock brokers plays very important roles in the market.

[ghm]

Will U rather buy UBA PO at N35 and wait for 6 months or more or buy at the Secondary Market at N39.14 (with commision of about 3%).

Where do you see UBA after the suspension is lifted? Up, DOWN or just stagnant.

[egoldman]

Hello Guys ,I have this question ; is it possible to buy the stock a company while its suspended on the trading floor and have been offering its POs ? I understand the stocks of a company would be suspended while its having its POs ,but someone once told me that it is still possible to buy stocks of a company while its suspended and offering its POs, what do you guys have to say about this ?

[Aggressive Investor]

The certificates dont take 1 month to come out. but they get lost in the mail... 'cos they get sent via NIPOST which is very inefficient. My advice, once you know the certificates are out, you can go the registrars to pick them up. if you purchase the ipo shares with a broker you can ask them to pick it up for you so you dont have to wait for the mailing system. Also bear in mind, once the IPO closes it takes about 6months before they start sending out certificates.

[c kenneths]

@ EGOLDMAN
It is very possible to buy stocks on technical suspension even if they are having a PO, though you will be buying at the pegged price.
@ AGGRESSIVE INVESTOR
It doesnt matter who is causing the delays, the fact is that it takes longer to liquidate your investment when you buy a PO.

[egoldman]

Thanks to everyone for the info being provided here , i have this question ; when my broker buys or sells shares on my behalf ,how long does it take for the deal to reflect on my CSCS account ?
i ask this cos my brokers told me some shares have been bought for me and its almost a week ,yet when i tried to use the automated call system with cscs ,it does not confirm the shares my broker told me thats been bought for me ,when i asked about this i was told that it would show on my account after sometime ,but someone told me this is not true that it show reflect in my account at least in less than 24hrs cos the cscs works with the NSE ,so this means that any shares that is bought or sold on any given day must reflect on my cscs account on that same day ,does anyone know what who i should believe about this ?

[ghm]

It depends on how much you trust your brokers. Mine always give me a contract note after a buy/sell transaction and a monthly printout of my CSCS account. Some are even quarterly but they provide a statement of CSCS account with them which will materialize with time.

[egoldman]

I guess i should make my question very clearer ;
How long does it take for one's cscs account to be updated when stocks are bought or sold on an account by the brokers ? does this updating happen instantly as the order is being executed or does the account get updated later time ,if the later is the case house long ?

[Stockbear]

@ Egoldman - Just like you, I'm a newbie to shares. My inlaw who introduced me to shares tells me you can verify your shares with the CSCS, usually within 4 days, but at most 1 week.

Outside of 1 week something's got to be wrong! We both have the same problem as we use the same broker. My first purchase took ages to go through, before finally showing up with the CSCS. My most recent purchases (16 March) are confirmed on the stockbrokers' system as bought, but as yet not on the CSCS system.

The problem with the cscs is two-fold: 1. Even if truly, the stockbroker has bought the requested stock, inefficiency is the mother of most operations in Nigeria. There could be any number of reasons why its impossible to use even the 24 hour verification lines with CSCS for over 1 week (both within and from outside naija).

2. If the the stockbroker is playing tricks on us, how do we find out? Even the Trade Alert system does not work properly, if at all it does work.

[egoldman]

This is why i have not scolded my broker cos i need to be sure that something is not being done the right way,i would continue to seek info to know how whats the estimated time that it takes for shares bought for someone to reflect on their cscs account ,i guess i may have to ask from the exchange floor itself and cscs directly .

[matosdynasty@hotmail.com]

Good morning, i want to refer to last correspondence, in which he claimed that he brought share on 16th of march, and he want it to reflect in his cscs statementimmediately,no now, the only advised i could advised the person is to wait for march printout, before any complain could be lodge.

[egoldman]

the isuue here i guess is to know the estimated time that it takes for the shares to reflect in ones account with the cscs ,example if stock was bought for me on the 1st march ,must i wait till the printout of mark transactions to confirm this ? i ask cos am not based in Nigeria ,the only way i use to confirm what was bought for me is to call the automated n umber of cscs and key in my account details,this is why i need to know an estimated time that it takes for shares bought for someone to reflect in their cscs account,i hope i made question a bit more clear .

[tzar]

I disagre with u. It depends on d stock u buy. Dangote certificates will be out this month. Its taking only 3 mnths after d ipo. Dunlop promises dat certs will be out in a week, moreorless 3 mnths after d ipo. Zenith bank shares didnt take too long too. Coys r becoming aware dat pple stay away 4rm ipo's bcos of d delay in getting their certs, so dey are doing their bit 2 speed up d process. If u are convinced about the shares u wanna buy, you can afford to wait 3-6 mnths. Cos most IPO's r discounted.

[Tayo]

I don't think people staying away from the IPOs will be a reason for the companies to start sending out certificates on time. As far as I know, most of those POs always turn out oversubscribed. I'm yet to receive my Intercontinental IPO. I've not heard anything too.

[Avocado]

(1) There's an automated notification possible for transactions on the NSE. For a subscription fee, you'll be automatically notified on your mobile telephone whenever a transaction occurs on your account, irrespective of wherever you have your shares, provided it is the same CSCS number. I have used this service for a number of months.

(2) On 2ry vs 1ry market buys: a straightforward spreadsheet could easily show up the difference and aid in making a clear-headed decision, and especially when the offer and market prices are quite close.

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