Should investors buy into the Nine Entertainment float?

With the prospectus released, the highly anticipated IPO is off and racing.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With today's release of Nine Entertainment's prospectus for an initial public offering (IPO) of shares – you can get a copy here — the next few weeks will be filled with a flood of information and analysis as investors work through the accounts and offer details line-by-line.

For retail investors the offer is due to open on the 12th of November and to close on the 29th of November; with a final price yet to be determined, the actual cost to purchase stock won't be known until the 5th of December.

For now, investors are being told that the indicative price range for the 125 million new shares to be issues is between $2.05 and $2.35 per share, which equates to a market capitalisation of between $1.9 billion and $2.2 billion.

With many IPOs expected to list in the upcoming months, it is important for investors to keep a level head and as always focus on the underlying value of the company. The IPO process generally creates much buzz and excitement and often headline-grabbing announcements, particularly whenever a company lists (begins trading) at a premium to the IPO price. While the enticement of a 'stag' profit is of course alluring, investors should remember that firstly there is no guarantee of a 'stag' profit and secondly, ultimately it is the underlying earnings of a business that determines value.

With a view to determining value, investors considering buying into the Nine IPO should take the time to review other similar media companies, in particular the most recent results and outlook statement from Seven West Media (ASX: SWM), Southern Cross Media (ASX: SXL) and Ten Network (ASX: TEN).

Not only will these peers provide a barometer for analysing the prospectus and specifically, the forecasts provided by Nine's management for the 2014 financial year, but investors can also consider the relative value they would receive from buying into the Nine IPO compared with an on-market purchase of one of the peer companies.

Foolish takeaway

As Warren Buffett reminds investors, price is what you pay, value is what you get. These are important words to keep in mind when faced with a situation where knowledgeable and informed insiders are selling to outsiders.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »