Sheng Siong stock crashed 10.71% today!

This is so ironic because today’s news paper headline was “Voracious appetite for Sheng Siong shares“. It cited some “market watchers” trying to explain the 70% run up of the stock since it debuted on Aug 17. The reasons given were like recession-proof, defensive nature and attractive dividends, institutional interest blah blah…

I feel so pitiful for those who chased the news and bought the share at $0.57. Based on $0.50 closing price, that is 14% loss for those people. I am sure from tomorrow, the news will turn around and offer complete different views, on hindsight of course.

Sheng Siong Price since launched (souce: yahoo finance)

I’ve written a few posts cautioning investors against speculative activities in this uncertain time. The crash of gold is a perfect example. I’ve also highlighted the risk involved in investing IPOs.

Many would argue that those who bought at IPO would have already made 60% even after today’s crash. The truth is, as highlighted in today’s news article, that nobody really knows why the IPO has went up 70% before today.

While I definitely “missed the boat” since you know I was not interested in this IPO in the beginning. Given the countless reports of possible recession and gloomy economic outlooks, many retail investors who bought it at the IPO price, in my opinion, would have sold it, with little or no profit, in the first couple of days.

The share was traded with top volumes even when STI is heading south. “The significant price movement.. could attract the attention of some retail and intra-day traders, thus creating a self-reinforcing cycle and contributing to the overall volume.” I’ve heard many unties and uncles bought the stocks in the past two weeks when the price just cannot stop shooting up.

Just think about it, if there is really institutional interest, why Sheng Siong IPO was merely 1.3 times oversubscribed? (If you even call that oversubscribe, how about Mapletree Commercial Trust IPO oversubscribed by 8.38 times?)

Warren Buffett once said: “When the tide goes out, you will find out who is swimming naked.”

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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