Welcome to this week’s Tricks of the trade, where I’ve been joined by a man with a real eye for IPOs (Initial Public Offering). He has targeted them as an opportunity to profit and he has done tremendously well with them in his time!
If you are unsure on what IPOs are or how they work, you can read up on them here in the part of my beginners’ guide that is dedicated to them.
Here’s what we spoke about:
Let us kick off as ever with some background, how long have you been on Football Index and how profitable has that time been?
Agatello: I started in the summer of 2017, in terms of profit, I made a decision when I created my Twitter account to strive for a following based on my football views, advice and suspect humour, without bragging about profits and pasting screenshots. However my net profit within that time is 5 digits and working towards 6 figures slowly but surely. I’ll tweet about individual victories and the ones that nearly come in but that’s usually to highlight potential in players rather than a bid to dump on anyone. My biggest profit was pre-empting the introduction of the Clean Sheet bonus (or something to give goalkeepers value), I made about £8,000 from that one!
What sparked your interest in IPOs in particular? When did you first start purchasing and targeting them?
Agatello: That was back in the day when two were released every Friday at the glorious 25p and I was just getting to grips with how things worked (like everyone, I thought I knew my stuff so I tried to make a fortune and got puzzled when my buys were failing!). I tried getting on them but I was too slow and lost money on every IPO at first. However I am not one to give up and like a dog with a bone, I was determined to work out how people were buying them faster, unlike a lot of people who just stamp their feet and don’t think outside the box or understand the multiple factors in play.
Briefly describe your strategy, what do you look for in an IPO purchase? How many shares do you regularly buy and how long do you hold them?
Agatello: My strategy has evolved over time, initially for the first year or so, I would analyse each player on Whoscored, Wikipedia and Google. This was because they were established players entering the market so I could access tangible data to analyse. Google was my starting point - to see if there were any signs of a move to big European clubs. The I would look into Whoscored to see what their general involvement consisted of; average passes and crosses per games were valuable statistics but they meant nothing if they had an awful goal threat. Sometimes, they were quite young so I would resort to trawling through Wikipedia to see what their youth record was like.
After analysing all of that, I would have an idea on their chances of winning PB and would try to find a similar player to benchmark against. If their IPO price was not at least 20 or 30p lower than a comparative player, then it was just not worth the effort to try and buy them and there was a period where the IPO prices were on the money and not worth bothering with unless I thought they had future growth in them.
I used to write previews on the forum which were popular but the amount of moaning got too much and the players coming on these days are purely based on hype and potential rather than statistical research so it is hard to write anything other than "I googled this player and Real are sniffing around" for example.
In terms of numbers, I just go for buy max as fast as I can and depending on the player, I’ll hold them for the IPD period, long term or flip them for a quick profit which is a good strategy on the current kids.
When is your time to buy? Do you always hang around during the two hour IPO period or wait for the price to settle?
Agatello: Yep I often hang around which as you know is quite painful, although if I think the market has completely missed a player’s value, I’ll buy again once they’ve settled.
Is there a rough % of your portfolio you allocate to this strategy?
Agatello: My portfolio can get messy at times, especially if I get it wrong and buy a player with zero interest or at too high a price so I can find myself with a player queued for a long time or waiting for his time to come but in general it’s quite a small percentage.
Spreads are always a topic of interest on Football Index but with IPOs specifically we seem to always see higher spreads. Sometimes instant sell is completely disabled for a period to presumably try and discourage flipping, has this ever impacted your decision to buy an IPO’d player?
Agatello: I understand why Football Index do it and it doesn’t deter me at all. Unless I’m desperate to move cash out of a player into someone I deem unmissable then I’m hardly ever concerned by the spread whether that be an IPO or normal purchase.
It also always seems to be increasingly difficult to get hold of a player anywhere near his IPO price, even if you buy almost instantaneously. There is always talk of bots being used in this space, do you have an opinion on this? Does this ever put you off?
Agatello: I actually know another trader who enquired with an American firm about a bot and I won’t name them for obvious reasons but they were quoted more than 20k so good luck to anyone who wants to try and recoup that from IPO’s! I’m not really a greedy person (or at least I don’t think I am) and as long as my methods get me players at a decent enough price then I’m not concerned if they’re in existence of not, the day I’m buying at the peak is the day I’ll just concentrate on standard trading instead.
If you can get in before the 'bots', IPO Prices are often perceived as high. Personally I don’t mind this because I think it is Football Index’s way of pre-empting full market price increases, and a market where they will one day look reasonably priced. Milner is a great example of this. Laughed at and unpurchased for a long time at £2.30 IPO, but has since hit highs of £3.38. What do you think about some of the prices?
Agatello: Yes I completely agree with you, Milner was everyone’s laughing stock at the time but it could well work in Football Index's favour when people make comparisons in the long run. They were, as mentioned above, too high for me at one stage but they’ve brought them back down again and the youth boom is seeing some serious rockets. I was always puzzled as to why Football Index priced some of them on the money because they’d make no money on a stagnant issue, especially some of these kids, that they are NEVER gonna pay out a penny on in a million years but as I say that seems to have eased off.
Editor's side note: Below you can see how the IPO prices of players released has changed over time. Now it does look a bit all over the place but can easily be explained with a bit of background knowledge. The prices were initially pretty high because some of the best players in the world were being added as there was only 200 players prior to this. As the quality dropped so did the prices. We then saw World Cup squads introduced between May and June 2018 - some of which were very cheap, for instance, players in the Iran squad, but since then players have been continually added and we've seen, in general, quite a shift upwards in the price of IPOs. Some of these players do look very expensive, even though that may be due to the overall increase in prices!
How do you think the share split might impact IPOs? Will cheaper initial prices increase demand or do you think a change in the number of shares needed to be bought and sold in order to move prices will have a bigger impact, perhaps more difficult to flip in the moments after becoming available to buy?
Agatello: It's an interesting point and one I was discussing with someone yesterday actually. I’m probably not the only one who is intrigued by Mike’s claim on Twitter that the amount to shift a price (if the Share Split is by 4) isn’t going to be anywhere near 1600. My initial thoughts were the figures were wrong but when working it out on a dirt cheap player I can’t see how they are.
So in answer to the question and without wanting to sit on the fence, it’ll depend on how many are required to shift the price and there is a possibility that flipping for quick gains could well be impacted.
Finally, do you like the IPO process? What do you think they could improve to make it better?
Agatello: I make money on IPOs so of course I’m happy with the system. I have seen a few examples where people have suggested it can be improved but at the end of the day it was ferocious back in 2017 and with so many people on the system now it’ll be more and more competitive as time goes on. I say let Football Index deal with the mechanics and trust in them to do what is right for everyone involved, they haven’t done a bad job so far have they!
In case you missed the previous editions of Tricks of the trade, check them out below!
Edition one with Big Don and his 1000+ player portfolio, catch it here
Edition two with dividend powerhouse Stamford is here
Edition three with Sunday to Friday trader Pierre is here
Edition four with transfer trading Ryan Pearce is here
Edition five with data driven buzzing Paul is here
If you’re new to Football Index and want to continue to learn the ropes, check out my free guide here!
I hope this article has been as interesting and useful to you as it was for me. We’ll be back next week with another top traders story!