Could this be the way to financial freedom in 5 years?

Hello AK,

I have been reading and following your blog. I have just started my investment journey and hopes to attain financial freedom within 5 years.

Recently, I have been given an investment offer which I would like to share with you and seek your help  by listening to your opinions. I shall not share with you where and who offered me the opportunity as I want to prevent any accidental bias.

I received an offer to join a club opened by a company (it is a reputable company, which is why I do not want to share with you the name of the company now as I believe you would have heard of the company before.) in Singapore. In order to join this club, you have to commit a 5-figure sum for a few years. 

One of the businesses of the company is to help other company IPO. 

Basically, in point form, I shall name the company I am talking about as IPO Services Ltd. 

1) Herbal Tea Ptd Ltd wants to IPO on SGX, so they approached IPO Services Ltd for help. 

2) IPO Services Ltd will check through Herbal Tea Pte Ltd's finances and other legal requirements that SGX requires in order for a company to be listed on SGX.

3) Herbal Tea Pte Ltd passed all the financial and legal requirements. Next, Herbal Tea Pte Ltd needs enough public interest before they can be listed. (If not they won't be a PUBLIC listed company.)

4) This is where members of the club comes in. IPO Services Ltd will show members this company and interested members will form the bulk of the "interested public" and be issued shares at pre-IPO prices. (For eg. $0.50)

5) With everything in place, SGX approves and Herbal Tea Pte Ltd is listed on SGX. The IPO price is $1. So members of the club can

• Sell off their shares to the "enthusiastic public" and make a 100% profit.
• Hold onto their shares if they believe in Herbal Tea. (Bearing in mind that the shares was initially purchased at pre-IPO price)

Therefore, effectively, the club allows me access to IPO opportunities BEFORE IPO.

 

I have read in many books to avoid IPO as IPOs are often over-priced and there are simply too many uncertainties. The way this offer was portrayed to me sounds "quite" secure. However, being the skeptic that I am, I wonder what is the catch? 

I am showed many videos of members giving testimonial of their 100%, 200% or even 300% profits within months (this should be a red flag,  but hey, this is not some shady gold buyback company I am talking about but a reputable PLC).

That 1 question alone is sufficient enough for me to not make any commitment, however, if it is genuine, I wouldn't want to miss out on an opportunity like that. 

Therefore, I am emailing you to ask you for your opinions on this "investment opportunity"

Hope you can help me.

Cheers

Hi,

If I were able to list a company at $1 a share, why should I sell to you at 50c a share? I might do it to incentivise employees and insiders but members of an IPO club to show that there is interest from the public? I don't think so.

Also, in order to join this club, you have to commit a 5 figure sum for a few years? For me to part with so much money for such a long time, an investment has to be a highly transparent and tangible. This does not sound like one.

There is no free lunch. This has to be a highly rewarding scheme for the owners of the IPO club. How are they rewarded?

This is not an investment opportunity to me. It is, at best, an invitation to speculate.

Best wishes,
AK

Related posts:
1. 9 wealth building blog posts.
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NOTE: The first step in converting from private to public is to undertake a process called due diligence. Due diligence is the analysis and valuing of a company and it is usually performed by a professional accountancy firm. It will involve a comprehensive look into almost every area of the business. This due diligence is the foundation upon which all information disclosed to the public is based. A value is then assigned to the company and an appropriate number of shares are issued. At this stage,the investing public is offered an opportunity to buy the shares. This is called the Initial Public Offering (IPO). (Source: Taking your venture public in SG.)

Unemployed, almost 55 and worried about CPF.

Reader says:

I have been following your useful CPF blog and learn alot. Lately I noticed something quite disturbing and what i deem as unfair.

We live a in HDB flat which had been fully paid off about 8 years ago. 

But I only noticed recently that the accured interest (supposed this is the amount I owed to CPF Board) has been increasing every month even after I fully paid off my flat long ago. 





I feel that this practice is unfair.

The accured interest should stop increasing the year that we pay off our loan. 

This kind of contradict the saying that the CPF money is ours. Seems that we always owe the government something somewhere.

It appears quite ridiculous because we had already paid hundred of thousands in interest during the loan term but still have to pay interest even after paying off the loan completely. 

If we borrow from banks, the interest would had stop once we clear the loan right?

I am unemployed and will reach 55 in a few years' time, how will this affect me? 

Kind of worried as retirement approach and without a job for sometime now.

I believed many Singaporean are unaware of this because we don't really track this item. 

How can we deal with this government policy? 

Do we have to pay CPF Board that substantial amount of interest if we sell off our HDB or downgrade to a smaller unit? 

Or when we reach 55 or 65? I get the feeling that one day I have to pay back that huge interest amount. 





How to retire peacefully without worrying about money in this place?

If I give the flat to my son later when I pass on, does he has to take over that accured interest?

Hope you can advise and share your thoughts.

Many thanks AK.

Best Regards

AK says:
The CPF is to help us with retirement adequacy. If we use the CPF money to pay for our homes, there is an opportunity cost. 

The government stops paying us interest and if we should sell our home, we have to pay ourselves interest in order not to compromise on the original purpose of the CPF.

In your case, you might be interested in this blog post: http://singaporeanstocksinvestor.blogspot.sg/2015/09/how-to-stop-accrued-interest-we-owe-cpf.html


Although it might appear otherwise, we don't pay the CPF Board, we are paying ourselves.



Upon reaching age 55, if you already have the MS (now the FRS) in your CPF account, you don't have to pay yourself anything if you were to sell your flat. 

The objective of the CPF to help with your retirement adequacy has been met.




If you do not have the FRS yet, then, it is a different story. 

Some of the money from the sale of your flat will have to go to your CPF account to fulfil this objective. 

There is also the option of BRS in which you pledge the value of your flat but that is another topic.





As long as we remember what is CPF's primary objective, everything makes sense.

Related posts:
1. Use CPF savings or cash to pay for our home?

2. Changes to CPF: BRS, FRS, ERS.
3. Retirement funding adequacy.