When is the best time to invest in a company that is going public?

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Some may no longer remember the days when there were two types of bank accounts: checking accounts and savings accounts. The former were remunerated, and the latter offered returns of several percentage points in exchange for securing a deposit for, say, one year.

 

A little over a decade ago, a national sport, which could even compete with football in popularity, was to dive on the Internet on Sundays looking for the most up-to-date offer of remunerated current accounts or savings accounts, to obtain profitability, with a fixed term and without risk. , to savings. There is no economic indicator that predicts that we will see again, in the short term, the banners with advertisements of “One year deposit at 7%” from 2008 when the Euribor was at 5.5%.

 

In a context where the annual variation rate of the CPI in Spain in July 2021 has been 2.9% and accumulated inflation of almost 2% so far this year, saving in a current account means losing purchasing power every month . Given this scenario, many small savers are forced to seek the return on their capital in the equity markets.

 

The savers who have managed to gain a foothold in the capital increases of the companies that have started trading this summer have been rewarded with a spectacular average increase in the share price of 42% on the first day of trading.

  • Endurance Motive, the small Valencian company that produces lithium batteries, placed only 2 million euros among investors and saw its price shoot up 56% on its first day, from the starting price of €1.85 to €2.88 at closing.
  • EIDF, the Galician company specializing in the installation of solar panels and photovoltaic energy for self-consumption, came out at a price of €4.20 and closed its first day with a rise of 31% at €5.50
  • The Catalan telecom Parlem placed 12.5 million euros (with the help of AndBank and GVC Gaesco) among investors at €2.83, with an excess demand of more than 100 million euros, and closed the day with a 26% increase to €3.57
  • The digital marketing and communication consultancies MIO Group and Llorente y Cuenca experienced increases of 56% and 32% respectively, having increased capital the first 3 and the second 10 million euros with strong overdemands.
  • Very striking has been the last IPO on BME Growth before the August break of Aeternal Mentis, the expert startup in technological infrastructure and artificial intelligence that with a capital increase of 2 million euros has seen its share close its first day in bag at €4.40, 57% above its starting price.

However, anyone who had bought shares in the companies in the days following their listing would have benefited from unusual returns on the Spanish equity market.

 

The average profitability of the 7 companies that have appeared this summer on BME Growth from their first day of listing to the close of business on Monday, September 13, has been 89%. EIDF with a rise of 229%% and Endurance Motive with a rise of 144% lead the dizzying rise of the market capitalization of these small innovative companies.

 

In comparison, the three companies that went public in 2021 on the continuous market, Línea Directa Aseguradora, Acciona Renovables and Econener have appreciated by an average of 23% since the date of their listing (at the close of Monday, September 13, 2021) and in their debut on the stock market they closed with a little less than 5% of average increase of the first day. But what are the factors that are driving this unusual and rapid rise of small companies listed on BME Growth?

 

On the one hand, they are companies that usually place small amounts (a few million) in their IPO, and when the offer greatly exceeds the demand, the effect is usually that the stock soars in its debut on the stock market.

 

Then there is the “wow” factor. Many of these successful small companies are completely unknown to most people, and when they go public they are “discovered”, with all their attractions, by investors and savers who quickly pounce on the few shares available on the market.