I start to see this new ICO (Initial Coin Offering) bubble building up and it reminded me of the IPO craze that we participated during our university days way back in 1990.
At that time, IPOs were like a 100% sure thing to make money as the stock would fly on the first day of trading. It was a new thing in Singapore and every father, mother, son was jumping on the bandwagon to get in.
We were undergraduates doing our uni life and finance was an area that we would eventually major in, as it became a career for most of us later. I decided that this was a good business opportunity to practice what we have just learned from the professors. I managed to talk to 5 other mates to get into this “collective investment scheme”.
It was then already very difficult to get an IPO allocation if you applied for a small number of shares, almost like a lottery ticket. As there was little to no regulation on IPO financing then, banks were tripping over themselves to offer 99% financing to anyone. Being the gung-ho guys that we were, we all decided to bid for 1 million shares (1,000 lots of 1,000 shares each)…
As relatively poor students then, we did not even have a cheque book amongst us, so we all had to deal in cold hard cash only. We agreed on the following day to each bring about $1,000+ cash to campus to pool up our resources to make up the 1% in order to get a cashier’s order, apply for the 99% bank financing and then submit the IPO application. As I was the only one that had a stock broker at that time, we will then submit our bid to my remisier.
The night before, I suddenly had cold feet and wondered what if our consortium had some disagreements later? Luckily, we were had done Law 101 in our first year as one of our modules. I quickly drafted a legal one pager and made sure all of us signed it in the presence of everyone the following day when we gathered the cash.
One of the guys had a girlfriend that worked in the branch of a local bank, so we went over to pass her the cash to obtain the cashier’s order and apply for the 99% financing before rushing over to the stockbroker to hand him our IPO documents.
The first sign that something was not right was when we met Peter, my remisier. He commented that it was a busy day and that we were his number 21 client who had submitted the documents to apply for 1 million shares on the Kim Eng IPO. “TWENTY-ONE !!!” @$*&&^%$^##@
Guess what? Kim Eng became one of the most oversubscribed IPO in S’pore and maybe the world. It was 705 times oversubscribed!!!!! The Jan 1990 IPO to raise S$32.5 million attracted an eye popping record S$22.9 billion in subscription monies. It went on to make a stunning debut as its share price tripled on its first trading day.
And what did we get for our 1 million shares application? ONE FREAKING LOT of a thousand shares…. We decided to sell off the miserable lot to take profit but one of the guys in the group decided to buy it over (it was still on physical scripts then) as he thought that there was potential for further upside. I remembered that the price we sold to him was S$1.61 . The poor guy never did see the price go much higher in the next 20 years…
The cost of the 99% financing for 4 days worked out to be about S$800+ for an almost S$800k loan. After deducting all the costs (not including the transport cost, sweat and tears etc), the net profit for each of us was about 50 bucks each… enough for a nice meal to celebrate our “success”…
What an unforgettable experience… The same group of friends still get together periodically and we sometimes talk about this crazy episode after all these years.
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