Moomoo Financial Inc. is providing you with the following statement to alert you to certain risk factors associated with investing in new issue securities. It is essential to evaluate whether investing in new issue securities, in general, or buying securities in a specific offering aligns with your investment objectives, risk tolerance, goals, and financial situation.
To obtain a comprehensive understanding of the business, operations, financial condition, and risks associated with investing in new issue securities, it is imperative that you carefully read the offering prospectus before investing. Prospectuses are generally provided and accompany a new issue offering, but can also be obtained by contacting Moomoo Financial.
Moomoo Financial Inc. encourages all investors to carefully consider these risk factors, and if necessary, seek advice from experienced and qualified financial professionals before participating in any new issue offering.
1. Lack of historical data: Unlike established companies, IPOs may not have a long track record of financial performance that is readily available to you. This lack of historical data can make it difficult to assess the company’s potential for growth and profitability.
2. Volatility: IPOs can be highly volatile and subject to significant price swings in the early days of trading. This volatility can be driven by a range of factors, including investor sentiment, market conditions, and news about the company.
3. Limited information: IPO prospectuses typically provide detailed information about the company, its products, and its financials. However, there may be limited information available about the company’s operations, future plans, and risks. This can make it challenging to make informed investment decisions.
4. Valuation risks: The price of an IPO is typically based on the company’s projected future earnings and growth prospects. However, there is no guarantee that these projections will come to fruition, and investors may end up overpaying for the stock.
5. Lock-up periods: Certain IPO investors may be subject to lock-up periods, during which they are prohibited from selling their shares. These lock-up periods can range from a few weeks to several months. Following the expiration of the lockup period, major shareholders and company insiders may sell large number of shares in the company. Such events often coincide with a drop in the company's stock price because of the increased number of available shares in the open market and can limit your ability to realize gains or cut losses.
6. Lack of diversification: Investing in an IPO can be risky because it often involves investing a significant amount of money in a single company. This lack of diversification can increase the risk of loss if the company fails to meet expectations or faces unforeseen challenges.
Closed-End Funds (CEFs):
Leverage Risks: CEFs often use leverage to enhance returns, which can increase volatility and the potential for loss.
Premium/Discount to NAV: CEFs may trade at a premium or discount to their net asset value (NAV), affecting the share price.
Management Fees: CEFs typically have higher management fees compared to other investment funds.
Income Distribution: The income distribution of CEFs can vary and is not guaranteed.
Follow-On Offerings (FPOs):
Dilution: Additional shares issued can dilute existing shareholders' equity and potentially lower the stock price.
Market Conditions: The success of an FPO can be highly dependent on prevailing market conditions.
Purpose of Offering: Investors should understand the purpose of the additional capital raise and its impact on the company.
Special Purpose Acquisition Companies (SPACs):
Acquisition Risks: SPACs are formed to acquire or merge with existing companies, which carries risks related to the success and valuation of the target company.
Regulatory Risks: SPACs must comply with specific regulatory requirements, and any failure can affect their operation and profitability.
Direct Listings:
No Underwriter Support: Direct listings do not involve underwriters, which can lead to less price stability and support during initial trading.
Market Demand: The success of a direct listing depends entirely on market demand for the shares.
Rights Offerings:
Expiration: Rights offerings have expiration dates, and investors must act within the given timeframe.
Exercise Price: The exercise price of the rights may be higher or lower than the market price, affecting investment decisions.
Convertible Securities Offerings:
Conversion Risk: The terms and conditions of conversion can impact the value and timing of the investment.
Market Conditions: Market conditions at the time of conversion can affect the potential returns.
Preferred Stock Offerings:
Dividend Risk: Preferred dividends may be suspended or reduced in financial distress scenarios.
Call Risk: Preferred shares can often be called by the issuer, potentially limiting upside potential.
Debt Offerings:
Credit Risk: Debt securities carry credit risk, where the issuer may default on interest or principal payments.
Interest Rate Risk: Rising interest rates can decrease the value of existing bonds, affecting returns.
1. Investing in initial public offerings (IPOs) or other public offerings (secondary offerings), collectively ‘new issue securities’, can be a high-risk, high-reward proposition.
2. I have read the “SEC Bulletin - Investing in an IPO”.
3. I received and carefully reviewed the ‘IPO Risk Disclosure Statement’ (set forth below).
4. I understand the ‘SEC Bulletin – Investing in an IPO’ and the ‘IPO Risk Disclosure Statement’ and are in a language that I fully understand;
5. I am not a “Restricted Person” and will not engage in prohibitive conduct as defined by FINRA Rule 5130 and 5131.
6. I will carefully read the prospectus and other investment materials before investing in a new issue.