So my pretties…. would you like to slam $10K on your credit card in a single click? I have just the thing. Loyal3 is an online stock purchasing program that allows you to purchase stocks with a credit card. And they are allowing $10K purchases on their latest bargain…the GoPro IPO. Loyal3 allows customers to buy stocks from a selection that they work with, or access certain IPOs.
You can view the basket of stocks that Loyal3 offers in my review of the company here , it isn’t comprehensive, but there are some decent ones. I personally am dripping $50 per month each into Berkshire Hathaway and Apple. The platform has no trading fees, and uses a batch trading system to keep costs low. For a while, Loyal3 officially allowed much larger transactions, but now they have reduced the monthly purchase to $50 max per stock.
What’s an IPO?
An IPO is the Initial Public Offering of a company, when it first gets listed on the market. It is an incredibly volatile time for an investment, but people jump onboard in the hope to ‘find the next Google’ (but not the next Facebook….)
Sadly, IPO investing is not restricted to accredited investors, and therefore businesses are trying to find more ways to make it accessible to dumb money. That’s how an IPO works in case you haven’t figured it out.. you build a company, sell some shares on the way through venture capital seeding rounds, then everyone cashes out when the dumb money comes along. Don’t have the cash? Don’t worry about it, Loyal3 will build a platform for you to buy these on your Credit Card…
But it’s GoPRO and they ROCK!!!
Yeah, I get it, they make awesome things that you can Velcro to your Codpiece and take great POV shots from, but that’s not the point when it comes to buying a stock. Sure, I see the wisdom in buying into a company that you respect and understand, but the disconnect that ‘fan buyers’ make is that they have no sense of value when it comes to pricing.
For example, say you love GoPRO, and never leave home without one… you gotta buy it. I set the price at $23 per share, reasonable, plenty of upside – should be worth $100 at least dude.
The pricing is a very complex thing, it involves taking the previous years growth, multiplying by forward expectations, add in future sales channels, the eye of a newt, and the current cost of Saudi oil… Take that number and triple it.
Then divide the number by shares issued, and make sure the final price is somewhere between $18-32 – that’s an IPO pricing.
Don’t ask about P/E or price to book- ha! These don’t matter in IPOs…
You shouldn’t as about the float, and how much is the reserve? This IPO is releasing 17,800,000 shares at a price between $21-24 per share. However, the company itself has 125,745,946 in Class A and B shares outstanding as of this IPO, and within 181 days of the IPO they will be eligible for release to the market. It’s worth considering that the IPO allows you the chance to buy into 10% of the float, but there is another 90% ready to flood the market within 6 months. You can check that out on page 151 of their prospectus.
Note that it isn’t unusual for an IPO to release in phases like this, and it will harm your share price. The logic here is that price increases when demand is higher than supply, but when supply increases (especially 10x) then your single stock has less appeal in the supply/demand curve.
In it for a quick scalp?
I was chatting about this in the forum and it seems folk think they can swoop in for a quick trade and get out again at a profit. While I can see the value in not holding the shares 181 days from IPO when the market could (but might not necessarily) flood with additional shares, I also wonder about people who think they can make a quick killing. If you are buying stock on a credit card, thinking that you will get in before the dumb money does… I have to advise you to look to your left, and then look to the right, and if you don’t see a sucker there then it is likely to be you.
It’s NOT manufactured spend
So many people seem to confuse what Manufactured Spend is. For a quick and simple explanation:
Manufactured Spend is a way to rack up an expense without value fluctuation. It can have other risks, such as Loss Risk, Fraud Risk, lock up cash flow Risk etc, but it doesn’t lose money. The reason is that we do this to make a profit from the transaction, typically below 5% (sometimes more with some stacking). If the underlying price is unstable then we cannot engage in the trade effectively. Sure we can still do it, but that is what dumb money does, takes risks when the reward isn’t certain.
- IPOs are not Manufactured Spend opportunities.
- Stock buying is not a Manufactured Spend Opportunity
- Gift card buying is not a Manufactured Spend Opportunity
Did the last one confuse you?
Gift card buying is not manufactured spend. Only when you have a resale or liquidation path is it manufactured spend. And only when the exit price is controlled. You have to understand the distinction.
So…. sure, GoPRO IPO is here, you can buy in with a Credit Card, you could earn some credit card points, but for your own best interests please ask yourself why Loyal3 is allowing you to buy $10K on a credit card. If you can afford to lose 100% of the investment then by all means go for it, but be very sure you are ready for that. And remember, Loyal3 sells in a batch at Noon, so if the stock starts nosediving you will be there with the rest of the chumps taking whatever price they will offer you at that time, no limits, no stops.