Ndubuisi Egwim walks through five questions to ask before buying into an IPO, using Dangote Refinery as an example. Understand the business model, calculate the true price you're paying, identify what could break the thesis (debt, competition, currency risk, regulation), match it to your time horizon and risk tolerance, and size the position to avoid over-concentration.
Now, there are some questions you should ask. So whether you're considering Dangote Refinery or another IPO 5 years from now, I'll leave you with 5 key questions I usually will ask. Number 1, do I really understand the business? Not just hype from podcasts you're hearing. How does it actually make money? Do I understand that? Number 2, what am I paying? Not just the share price. What am I effectively paying for the company? Future cash flows and all that. Number 3, what could make me wrong? Okay. Debt. Competition, currency, AI will wipe the company, regulation, management, execution. Think about that. Number 4, how does it fit my life? What's my time horizon? What currency will I eventually spend? Can I afford volatility? Do I need this money in 5 years or 10 years or 20 years? And then number 5, how big should my position be? That's one people skip. You can have an intelligent investment idea and turn it into a stupid financial decision simply by just putting too much money in it. Okay, so I've invested in startups and I know that you can't just allocate a massive amount in startups, okay?
