Earlier this year, we looked at WWE’s 4x returns in the first nine months of 2018. This stock has been crushing it on the stock exchange and more than quadrupled in value.
Though the recent pullback impacted investor returns slightly, it has still gained a staggering 142% this year.
So what if you had bet on The Rock and Stone Cold Steve Austin way back in 1999? That was the year WWE went public. What if you put aside $200/week and invested it in the WWE stock?
Your investment would be worth $1M today
Yes, your $200/week investment for the last 19 years in WWE would have made you a millionaire. However, just like any other stock, WWE has had its share of ups and downs.
In December 1999, the stock was trading just shy of $18 a share. Over the next four years, it fell to $11. Though it rose over the next couple of years, the stock slipped again to the $10 mark around the end of 2011.
WWE shares only began its staggering bull run by the end of 2014, where the stock rose from $14 to its current price of $73.6. The stock touched an all-time high of $97.69 earlier this year.
Are these returns impressive?
What if you had invested in WWE when its IPO (initial public offering) was launched in 1999? A $200/week investment amounts to an annual investment of $10.4k. This then amounts to just over $200k over the next 19 years.
With a payback of $1M, the annual rate of return is 16%. Is this enough for the amount of risk undertaken?
Despite the $1M tag it promises, any other major index or alternative investment vehicle such as REITs would have generated similar returns with a far lower risk exposure.
Imagine an investor who had actually invested during the IPO. He would have had to wait for 16 long years just to break even.
What’s the way forward for WWE investors?
WWE’s traditionally focused on male wrestlers, skewing to their male-dominated audience. But it looks like that could change.
Led by former UFC superstar and current WWE Women’s champ Ronda Rousey, the company has staged its first-ever PPV this year in an ambitious attempt to broaden their female audience base.
This event included over 50 female wrestlers from the “Raw” and “SmackDown” franchises.
Wall Street estimates WWE’s sales to rise by 60% over the next two years to $1.27B, up from $800M in 2017. With rapidly improving profit margins, earnings are also expected to grow at a significant 71% over the next five years.
In fact, WWE’s net margin is expected to rise from a mere 4.1% in 2017 to 22% in 2020.
Though WWE’s stock lost over 25% in market value since October this year, analysts are again betting big on them.
Early Uber Investor: ‘I’m Happy With Uber’s Poor IPO’
Lance Armstrong may not have gotten his $3B on his $100K investment, but his $100K still got a proper HGH/steroid boost.
And despite the rough outing, early investor Mitchell Green says he’s happy with the current IPO price—despite falling WAY south of its initially rumored $120B level.
And no, it’s not the Mitch Green, the one who got into a street fight with Mike Tyson.
Uber rich Mitch Green looks like this:
Anyway. Green says he’s happy with the current pricing. Check out the video to see why.
‘Going Public’: IPO, Explained
It’s a buzzword we hear constantly—and one that’s sure to generate tons of headlines. Alibaba had the largest in history (before its billionaire founder decided he wanted to quit to be a grade school teacher.)
Lyft IPO’d recently also, beating arch rival Uber to the proverbial punch.
Other than being a buzzword and a big story, what exactly is an IPO?! Well, let’s break it down.
What is an IPO?!
In technical terms, an Initial Public Offering (IPO) is the first sale of stock issued by a company to the public. In other words, this is the moment when a private company goes “public” by offering its shares for sale to the public.
So when a company does go public, the valuation usually spikes dramatically—and the company can now use the funds from the sale of shares to feed the business. It’s a fabulous funding source for a company.
Before that, what is a company?
Prior to going public, a company is a privately-owned firm. Obviously. The company initially attracts investments or seed capital from the co-founder, friends, and families.
Business investors such as venture capitalists, private equity companies and angel investors pump in money if they are optimistic about long-term prospects and sustainability of the company.
On the flip side of things, you sometimes have companies that decide to go “private,” like Elon Musk said he wanted to do with Tesla.
Why does a company opt for an IPO?
The biggest advantage for a publicly listed company is access to capital. This capital can be used to purchase machinery, fund research and development or pay off any existing debt.
The firm will then be listed on a public exchange and provides an exit route for business investors and founders.
When Facebook went public, Mark Zuckerberg sold 30M shares worth $1.1B. An IPO is the most common way for investors and VCs to make a significant return on their investment. In fact, it’s considered the ultimate exit for founders.
How much capital do the companies get?
Let’s run down the list.
Top tech unicorns such as Uber, Slack, and Airbnb are on course to file for an IPO over the next 18 months.
The company that is looking to go public hires an investment bank to underwriting the IPO process. Investment banks can either work together or individually in this process.
What do the investment bankers do?
In other words, all the boring admin stuff. In exchange for this, they collect a nice fat fee, usually anywhere from 4-7% of gross proceeds.
Those involved hold several meetings to finalize the IPO process and determine the timing of the filing. Once this is wrapped up, they shift to performing the due diligence to ensure the company’s registration statements are accurate.
The due diligence tasks include market due diligence, legal and IP due diligence, financial and tax due diligence. At the end of this process, the companies then file for an S-1 Registration Statement.
The S-1 is usually what tips off the press and the public that a company is about to go, well, public.
And what’s the S-1?
The S-1 statement includes information about the companies’ historical financial statements, company overview, risk factors, and other critical data.
A pre-IPO analyst meeting is then held post the S-1 Registration Statement to educate analysts and bankers about the company.
A preliminary prospectus can also be drafted at this stage. The underwriting investment bank conducts pre-marketing to determine the interest of institutional investors and the price they are willing to pay per share.
Now you’re ready to go public
The price range for an IPO is set and the S-1 Registration Statement is amended with the price range. The company’s management organizes road shows and marketing activities to generate interest for the upcoming IPO.
Based on investor interest, the price range per share can be revised. The investors will apply for company shares and this application window is open for generally 2-4 days. The company shares can be oversubscribed or undersubscribed.
Once the IPO is priced, the investment banks will allocate shares to investors where the stock will now be available for trading in the secondary market.
At this point, a company is now ready to go public. Here’s how people usually look when that happens.
Congrats. You’re now an IPO expert.
[VIDEO] Penny Stocks, Explained
Penny stocks are equity investments that are traded outside major exchanges. These stocks are traded at low prices and have a small market cap. As penny stocks are illiquid and highly speculative, they carry a high risk of investment.
The US Securities and Exchange Commission (or SEC) defines penny stocks as shares with a value of less than $5. Typically, a penny stock is traded over the counter or by using pink sheets.
Despite the high risks of investment, penny stocks can be a lucrative form of investment because of its low price and higher prospects of return.
Suitable for investors with a high-risk tolerance
Investing in equity markets is risky, particularly because it’s driven by price fluctuations and volatility. Investors in penny stocks will generally have a higher threshold of risk tolerance. Penny stocks are far more volatile than blue-chip stocks.
Investors hence need to take precautions while investing in penny stocks. They need to have a stop-loss order prior to entering into a trade. This will minimize the amount of downside potential in case the markets move in the opposite direction.
Penny stocks also provide an opportunity for significant companies. These companies are generally high-growth ones but with limited cash resources.
Why are penny stocks attractive to the average retail investor?
Generally, the average retail investor associates a low price stock as a bargain. But this cannot be farther from the truth. A stock can be overvalued at $1 and can be undervalued at $250.
The average investor fails to understand this due to limited investing knowledge. Penny stocks are trading at lower values for a reason. They might experience a bull run resulting in a significant price appreciation but can also come crashing down in no time. It is far easier to manipulate penny stocks.
The “Caveat Emptor” principle should be applied when investing in penny stocks. Sure, there are success stories even for penny stock investors, but is worth the risk?