An IPO (or Initial Public Offering) can be an exciting event on the ASX, or any other share market for that matter. That’s because it involves the process of a private company becoming public, with its shares trading on the stock exchange for the first time.

Normally, most investors are locked out of investing in private companies because the shares aren’t publicly traded on a market.

But an IPO ‘democratises’ a company by allowing it to be accessible for the first time to any investor with money to spare. Thus, it’s always an exciting event with a lot of ‘buzz’ when a company goes public for the first time.

All listed companies underwent some kind of IPO in their history. This is the case whether relating to recent listings like Splitit Ltd (ASX: SPT) or those that occurred over a century ago, like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Some big names that have IPOed on the ASX in the last 5 years include Splitit, as well as Viva Energy Group Ltd (ASX: VEA), Marley Spoon AG (ASX: MMM) and Elixinol Global Ltd (ASX: EXL).

Over in the United States, there are some bigger names you might have heard of that recently had IPOs. These include Uber Technologies Inc (NASDAQ: UBER), which floated just last year, along with Beyond Meat Inc (NASDAQ: BYND). These were very exciting events that generated a lot of investor interest.

Should you invest in IPOs?

Just because you can invest in something, it doesn’t necessarily mean you should. Investors often get swept up in the hype of an IPO. But here’s why I think investing in one usually isn’t a good idea for the average investor.

When a company is private, it is subject to far less scrutiny than a public company. Even after a private company becomes public, it can sometimes take years for all of the company’s skeletons to come out of the closet.

What’s more, you don’t get a chance to see how a company is actually weighed up by the market until after the IPO occurs. This can result in the shares being quickly re-valued.

Thus, a company can believe its own shares are worth $10 each and, as such, offers them at its IPO for $10. But if the market has a different opinion, you might find the shares trading at $7 or $5 each very quickly.

Boom, you’ve just lost 30% or more of your money on day one.

Foolish takeaway

In my experience, losing money on an IPO happens more often than not. Therefore, I generally think it’s preferable to wait until after a company has floated to buy in. That way, you can ensure you are buying its shares at the market price, rather than at a price the company has concocted. Too often, IPOs are done to let old investors out, not to let new investors in. Thus, I think all investors should be very careful with IPOs and be sure to have a cold shower before jumping in.

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• Why this small-cap ASX pharmaceutical share rocketed 27% higher today
• 2 ASX shares perfect for dollar-cost averaging
• 2 quality ASX shares to buy for long-term growth

Sebastian Bowen owns shares of Uber Technologies and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Commonwealth Bank of Australia (ASX: CBA) share price is rapidly rising. It’s currently up around 5% right now. It’s now up around 9% from the start of the week.

It’s not just the CBA share price which is rising rapidly. Today alone the Westpac Banking Corp (ASX: WBC) share price is up 9%, the Australia and New Zealand Banking Group (ASX: ANZ) share price is up 9% and the National Australia Bank Ltd (ASX: NAB) share price is up 8.8%.

This is one of the best days ever for the major ASX banks if they hold onto these gains.

The error with the jobkeeper total cost is good news in the sense that far less people are requiring support than previously expected. So perhaps that means the economy won’t be hit as hard as previously expected?

With a share price fall from around $90, investors were obviously expecting a really painful downturn for CBA. But clearly the news is getting better with restrictions lifting and people getting out and about again.

Is it time to buy the CBA share price?

So far CBA has provisioned $1.5 billion for COVID-19 impacts. Not much in the grand scheme of CBA’s overall loan book. If that’s all the damage is going to be then the CBA share price could seem pretty cheap.

But I don’t think it’s all rosy just yet. In Australia there are question marks for at least the tourism and construction sectors.

The US and China could each individually cause major problems for the entire world if there’s a new trade war. The coronavirus continues to spread at an alarming rate in the US. And who knows what the US election will throw up?

If you’ve been waiting to buy CBA shares then I think now could be the time to do it – everything is looking like it’s on an upward trend. But I’m not sure the dividend will remain as high. Profits could fall if the net interest margin (NIM) declines.

More reading

• ASX 200 up 0.1%: Big four banks rocket, Afterpay sinks lower
• Why the NAB share price is surging higher today
• Why ALS, Metcash, NAB, & Pointsbet shares are racing higher
• How much money should you have in your emergency fund going forwards?
• Where to invest $5,000 in ASX 200 shares today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Soaring share price: Is CBA a buy? appeared first on Motley Fool Australia.

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The Aussie dollar hit a new 8-week high overnight against the United States dollar, climbing as high as 66.75 US cents. The last time the Australian currency traded at these levels was back in early March.

It follows the massive dollar sell-off in late March when the ‘flight to safety’ amid the stock market crash pushed our dollar under 57 US cents – a multi-decade low. The Aussie is seen as a ‘risky’ currency partly due to our economic ties to China and, hence, is often sold-off with ructions in the global economy. Thus, the recent rise reflects a growing appetite for risk against safety in global markets.

So, apart from restoring some national pride, what does this move mean for ASX shares?

What a high Aussie dollar means for ASX shares

A higher exchange rate typically means imports become cheaper while exports become more expensive. That’s because it takes less Aussie dollars to buy a good or service denominated in foreign currencies with a higher exchange rate. Vice-versa for selling goods or services.

Therefore, a higher currency benefits companies importing products into Australia to sell, disadvantaging companies selling goods or services beyond our shores.

Thus, I’m looking at retailers as the biggest beneficiaries of a higher Aussie dollar. Not so much companies like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL), which sell mostly Australian products as their benefit is far more muted.

No, it’s companies like JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) who stand to benefit the most, in my view. These companies sell electronics, TVs, white goods and computers, most coming from markets like the US, Japan, and China. For JB and Harvey Norman, importing these goods will now be cheaper. This price saving could then be banked for extra profits or passed onto consumers at no cost to the company. Cheap TVs all round!

Conversely, the biggest losers from a higher Aussie dollar are exporters like mining companies. Most commodities (like iron ore or gold) are priced in US dollars, so miners like BHP Group Ltd (ASX: BHP) or Newcrest Mining Limited (ASX: NCM) receive US dollars. These are then domiciled back into Aussie dollars and with a higher exchange rate, they’ll get less Aussie dollars back for each US dollar received.

Foolish takeaway

Currencies change all the time and have cycles of their own. Therefore, the Aussie dollar isn’t something you should lose too much sleep over, in my view. Nonetheless, its always good to know exactly what’s happening in the economy and your ASX share portfolio, of which exchange rates play a meaningful part.

More reading

• Why Afterpay, CSL, Fortescue, & Newcrest shares are dropping lower
• 3 easy rules for building a massive ASX share portfolio
• Where to invest $5,000 in ASX 200 shares today
• Where will the Coles share price be in 1 year?
• 3 exciting ASX growth shares to buy in June

Motley Fool contributor Sebastian Bowen owns shares of Newcrest Mining Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The Aussie dollar just hit an 8-week high. Here’s how it affects your ASX shares appeared first on Motley Fool Australia.

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