Investing in Private Limited Coy

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#21
(23-12-2015, 11:27 AM)gzbkel Wrote: ^^ Everything is relative, there is no absolute security.
Your statement implies that US stocks offer more security due to regulations.
Care to share about what is lacking in Singapore?

Not sure if Start Ups are applicable, but typically 'infant' private limited companies. eg. Angel Investing  Angel


You can check out my posts on the following:
Conversations with Startup founders:  https://apenquotes.wordpress.com/2015/12...-founders/

You can also check out Financial Samurai blog post, on why he discourages investing in startups http://www.financialsamurai.com/average-...ont-do-it/

Incidentally there are a number of crowdfunding companies that allow retail investors to invest in startups. eg. Crowdo, Fundedhere
https://apenquotes.wordpress.com/2015/12...per-annum/
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#22
http://www.singaporelawwatch.sg/slw/inde...RlXR7.dpbs
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#23
From a risk point of view , public minority investors should avoid putting their savings into private companies. There is no ready stock market to sell when you want to exit.
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#24
the problem with private companies is the only recourse for minority shareholders is through civil lawsuits.
unless you have a big minority stake, usually not worth the trouble.

Just see google General Magnetics to see how minorities get treated in a private company.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#25
(21-12-2015, 09:43 PM)GFG Wrote:
(20-12-2015, 09:16 PM)marandaz Wrote: Hi Cityfarmer,

let's say it is listing in ASX, and indeed their ASX website do say that the min. shareholders needs to be 400.

My other question is
1. What is the average ROI/ROIC of a HFT firms or proprietary trading firms/individuals that use trading algo to do trading? Is it possible to have the average MONTHLY ROI to be >20% over three years period (Personally, I am skeptical) .
2. Is Proprietary trading firms based in SG regulated by MAS?

I have experience investing in private companies, and all I can tell you is to proceed with EXTREME caution.
There are millions of ways you can get screwed as a minority shareholder in a private company. I say this from experience.
It's a very simple thought process. Either:
1) Invest enough so that you are the majority shareholder and call the shots.
2) Invest as a MI, but have almost blind trust in the guy running the show aka the CEO.
Blind trust in i) the honesty and integrity ii) the competence

For example, the major SH/CEO/whoever has a controlling stake can issue share options to himself or allies and dilute you and there's nothing you can do about it as a pte company. (seen the movie about Facebook? happens in real life too)
Sure, they can do that in a listed company as well but there is much more public scrutiny.

The major SH can set up a separate company, divert business to that company and eventually you own a MI in a shell, useless company. In a listed company, it's illegal as the director/CEO has a fudiciary responsibility and can be called out by SH.
In a pte company? good luck proving that.

The major SH and allies can simply keep the company going, pay themselves fat pay cheques and there's nothing you can do. Essentially, indirectly your investment would be for paying them.
In a listed company, again they'd get called out for that in AGM, media attention, share price would drop etc.

Now I can go on and on and on, and trust me I'm speaking from real life experience so be really careful.
In this particular instance, I'd be even more wary because isn't doing an IPO the way to increase your SH base and sell shares to the public?
The pte companies I've invested in or considered investing in, are always more than keen to show me their financials. sure, mostly unaudited but still they're more than happy to show me with a caveat that it's confidential. How else would they be able to get investors? At that stage, there is no branding, no revenue visibility (I'm talking about mainly Series A venture funding), almost nothing to talk about except an idea and a sexy story.

I'd walk away immediately from anyone who is reluctant to show me audited financials and still ask for money.
Even if you're wrong and you miss out on a supposedly "good" investment, it's not a mistake. You can only make good judgement calls from data available to you. In this way you miss out on potential catastrophic disasters. There's always another opportunity around the corner if you work hard enough to unearth it. But 1 catastrophic disaster is enough to screw up many many yrs of hard work.
That's my honest opinion.
"The major SH can set up a separate company, divert business to that company and eventually you own a MI in a shell, useless company. In a listed company, it's illegal as the director/CEO has a fudiciary responsibility and can be called out by SH.

In a pte company? good luck proving that."

In this week's issue of the edge magazine, is a report about kingboard copper foil. It is basically a real life exact illustration of what I said
Quoted from the article:
"..... kingboard copper foil holdings, which sells the bulk of its output to its parent group on terms that it's minority investors say are unfair"
Guess who owns the parent group? That's right. The same management in kingboard
So basically divert business to support your own interests
The minority complained to SGX and MAS.
If you read my earlier replies on several threads, scenarios such as these are what I have always been talking about (re. The CDW Holdings thread too)
Now the minority has sued n won in the Bermuda courts
Now imagine this is a listed company n all these can be done n the minority has to invest $$$ to sue, regulators still haven't done anything as yet, there's media attention etc
Now imagine this same scenario in a private company.
Think my points should be pretty clear.
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#26
http://www.straitstimes.com/business/com...of-abterra

2007-2010 unusual transections.
2011 discovered irregularities.
2013 audit report.
2016 sgx report to authorities.

The major players may not even be singapore based. Even if found criminally liable, will they face the music? Its amazing to note how many sg listed entities are not even sg based.
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#27
Here are few statistic of SGX and SEHK

SGX:
Domestic stocks : 483 (SG-based companies)
Total stock : 773
Domestic Ratio : 62%
Source: https://en.wikipedia.org/wiki/Singapore_Exchange

SEHK:
Domestic stock :  737 (HK-based companies)
Total stock : 1615
Domestic Ratio : 46%
Source: https://en.wikipedia.org/wiki/Hong_Kong_Stock_Exchange

(sharing info)
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#28
Hi Marandaz,

I'm well aware of the company you're mentioning - the one at Ubi right.. Tongue

My questions, a plenty, almost killed the consultant and it seems like he is trying to 'act' friendly with me now just for the sake of acquiring knowledge and counter all of them to other potential clients. Sadly, I didn't give him a second chance.

If you like to share with me your thoughts, perhaps we can discuss in PMs so as not to flood this thread - open discussions are possible but prepare for some lengthy ones.

Cheers,
S.K
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#29
Hi Ken,

I have dropped you a PM some time back, hope to hear from you.

Thanks
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#30
(17-01-2016, 02:56 PM)marandaz Wrote: Hi Ken,

I have dropped you a PM some time back, hope to hear from you.

Thanks

Hi Marandaz,

It seems like you've disabled PM function, kindly activate and will do the needful.

Cheers,
SK
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