There are different types of investors and the discussion on the Romanian IPO of Hidroelectrica (H2O) manipulates the entire market during this week.
I am a private individual (retail) investor, and I worked many years for and with institutional investors. I have many friends and acquaintances interested to invest in Hidroelectrica, but in same time I know some reticent investors or entities.
Apparently (or if we read some articles) it seems that the aim of investors is different, and many times institutional investors are named ‘vultures’ that squeeze the cash from portfolio companies as from lemons for a lemonade. In real life, the interests of institutional and retail investors are in majority of time aligned.
In UK the public authorities make things to look more interesting: Financial Conduct Authority (FCA) partnered with Celebs Go Dating’s Anna Williamson to host an event for young investors - Swipe Left, Invest Right: How the Principles of Dating Can Be Applied to Investing. The event encouraged young investors to adopt the same principles as they do when dating and become smarter investors. The event was interesting as the financial language was ‘translated’ in the language spoken by young investors when use an app for dating.
FCA considers that investors need to make better informed investment decisions that suit their financial circumstances, and recommends ‘5 important questions to ask yourself before you invest’:
· Am I comfortable with the level of risk?
· Do I understand the investment being offered to me?
· Are my investments supervised by a regulatory authority?
· Am I protected if the investment provider or my adviser disappears?
· Should I get financial advice?
So, what investors want?
Investors wants to put money in an industry they are familiar with. It is difficult to invest in something that you don’t understand, and it is difficult to understand when the potential investment speaks a ‘foreign’ language.
Investors want to see a management team they believe in: there are many companies that are in the way of implementing international corporate governance principles.
Investors prefer a company acting in a large market and / or having a competitive advantage.
Investors choose companies with a good momentum. However, the potential risks need to be disclosed to avoid future investors claims in future.
Investors need money, so the investment needs to generate cash flow. Investors are not only putting money in an idea, company, or vehicle, but they need returns for their investments.
If you want to invest, why do you do this? What are you questions before taking the decision? Swipe left or invest right in H2O IPO?