INVESTMENT STRATEGY ON STOCK INITIAL PUBLIC OFFERING

Investment is a business carried out by investors in order to obtain profits in the future. Investors invest in investment instruments, such as savings, deposits, bonds, and stocks. Investment in the form of savings, deposits, and bonds provides benefits in the form of interest that is received periodically by investors. Investments in stocks provide benefits in the form of capital gains and dividends. The profits received by investors who invest in shares are theoretically higher than in savings, deposits, bonds. This is because stock investments have a higher risk than savings, deposits and bonds. Investors who are willing to take higher risks will expect higher returns from their investments.

        Retail investors who wish to invest in stocks should invest in shares of public companies listed on the capital market. The capital market in Indonesia is charged with the Indonesia Stock Exchange (IDX). To date, more than 500 companies are listed on the IDX. All of these companies must comply with regulations issued by the IDX and financial services authority (OJK). This regulation is expected to improve corporate governance listed on the IDX and protect investors who invest on the IDX.

        The best time to invest in shares is when the company first registers on the IDX, known as an initial public offering (IPO) of shares. The company registers on the IDX with various motives. The main motive for the IPO is to get funds from the community to expand the business. Other company motives, namely improving corporate governance, enhancing company reputation, and obtaining funds to pay off corporate debt.

PHENOMENON IN STOCK IPO

        Two phenomena at the time of a stock IPO are an initial return, and a decline in the long-term share price performance. The initial return is a phenomenon of rising stock prices of newly listed companies. This increase is of short duration. Usually only a few days after the company's shares are traded in the secondary market. The SECOND phenomenon is the decline in long-term stock price performance. The decline in long-term performance is in the form of a decline in stock prices for three to four years after the company is listed on a stock exchange. The phenomenon of early returns and a decline in long-term performance after an IPO can be observed in several IPO companies in Indonesia. One example of the phenomenon of the decline in share price performance experienced by the initial offering of shares of PT Krakatau Steel. These shares are offered at an initial price of Rp850.00 per share. Stocks experienced a sharp increase in prices on the first day of trading on the secondary market. The stock price opened at Rp.950.00 and closed at Rp.2,270.00. Strengthening of prices lasts until the fourth trading day in the secondary market. The increase in share prices was followed by a decline in the performance of long-term stock prices as evidenced in June 2020 the price of PT Kratau Steel's shares was traded at a price of around Rp. 200.00.

    Price behavior at the beginning of trading in the secondary market shows optimism from some investors in the secondary market. The share price opened higher than the bid price and was followed by an increase in price up to 50% above the bid price. Positive return at the beginning of trading illustrates the optimism of stock investors in the secondary market, then it will be followed by a slow decline in the long-term performance of stock prices. The share price of PT Krakatau Steel continues to decline in price up to Rp. 200.00. This price is far below the market price on the first trading day of Rp1,270.00. The decline in stock prices shows a decline in expectations of stock values ​​by optimistic investors. Investors who are optimistic about the company's prospects will reduce their valuation of shares based on information that is considered bad news received after the IPO. New information in the form of financial statements issued by the company after the IPO will change the optimistic investor's assessment because optimistic investors have more information to judge more precisely the value of the company.

INVESTING STRATEGY AT STOCK IPO

        The phenomenon of early returns and a decline in the performance of long-term stock prices provides an investment strategy for investors who want to make a profit. Investors should sell shares at the beginning of trading if at the beginning of the stock trade there is a relatively high initial return. Test results generally find the initial return has a negative effect on the performance of long-term stock prices. This means that the higher the initial return, the lower the long-term stock price performance. Conversely, investors can continue to hold shares in the long run if the initial return is relatively low because the lower the initial return, the higher the long-term stock price performance.