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The Stealth IPO Returns… (PETZ?)

The Stealth IPO Returns… (PETZ?)

September 30th, 2021

We have talked in the past about the ‘Stealth IPO’ – small, low-float, under the radar IPOs run by a small group of underwriters such as Boustead Securities, Sutter Financial, and Network 1 Financial. These IPOs debuted unannounced, usually priced between $4-5 with floats of 5M shares… then proceeded to rip up through multiple halts to reach valuations of $20, $70, even $100 or more in the days following the debut. Standouts include WNW, TIRX, CPOP, UTME, EJH, and others. IPO Warriors caught onto the trend early, and we reaped massive gains on many of these trades.

These appear on the surface to be some kind of money laundering stunt to transfer Chinese capital out to Western accounts, but with the crackdown on Chinese IPOs, this method has been all but shut off to wealthy Chinese: who now, more than ever, are desperate to expatriate their funds into foreign banks. And so… the Stealth IPO has gone incognito.

The first example we saw was FCUV – a Boustead underwritten uplisting of a 5G company that didn’t appear to have much connection with China, until you check out their website and review their “Team”. Well, FCUV ran up from about $6.75 on it’s uplisting to a high of $25 within one day. It now trades at $8.66

After that, I predicted that we’d see another Boustead lead uplisting or secondary offering for a random, low float Chinese stock that would produce a similar run up, and I think I may have just found it.

So this company went public in 2017, and in the first week following its IPO, it debuted at around $6 and ran up as high as $32, and has since dropped to trade in a range of just $2-3 per share. The float is just 9.67M shares, and it has made random spikes as high as $14+ on a single day in February 2021. It closed at $1.84 on September 29, 2021 and then dropped over 30% today on the announcement of the offering: largely due to the fact that the offering is priced for 10M shares at just $0.89 per share (and includes 2 warrants for $0.01 each for each share purchased via the offering). The warrants have a strike price of $2.06, and are not going to be listed on any exchange, so undoubtedly, the offering was sold to buyers with close connections to the company.

For this kind of Stealth IPO scam to work, the operators of the scam need two things: a way to transfer fresh shares to buyers outside of the company without market interference, and they need a tiny float that they can control so they can run up the price without external shareholders dumping shares to keep the price down. With the Stealth IPO: they would simply float a small share count on a little known IPO, buy up the shares in the pre-debut, and then choke the price up to insane values through a series of halts until they could sell off and bank profits.

In this version, it appears that insiders have purchased over 7.2M shares over the past 12 months, whereby controlling roughly 75% of the 9.67M free float – it wouldn’t surprise me if they ate up a significant portion of the 1.36M shares that were traded today as the share price plummeted. Anyway, they control enough to initiate a surge in the price, and through the secondary offering, would have been able to put the excess shares in the hands of their counterparts outside of China.

So it goes without saying that the first part of this scam will be to push the price of the stock back up over $2.06 so they can exercise their warrants. If you can pick up shares at $1.30 or below, that’s a 50% upside from the current share price. But if they are up to their usual shenanigans… then they could run this up to $10, $30, $50, or more before they decide to pull the trigger on selling off the 37M shares they could potentially dump once they hit their mark.

The company I am looking at is a pretty suspicious looking company that ostensibly sells pet food in China: basically, dog crap as far as corporations go, but for this play, the worse it looks on the surface, the better I like it as a setup. The company is called ‘TDH Holdings’ and the ticker you’re looking for is PETZ.

I see it like this: if this is really a genuine company raising money to fund acquisitions, as stated in their Form 6-K filing, then it’s probably not a great investment: I mean, they basically priced the newly minted shares at $0.30 per share to raise a measly $10M: which really, makes no sense.

So I’m betting that the downside is somewhere around $0.80-1.00, but more likely, the game runners on this stock will find a way to push this up to $2.06 (like I said, a 50% win right there). Beyond that, we’re looking at a potential runaway train that could go parabolic – my hypothesis is, after all, that this is the newest incarnation of the Stealth IPO.

One word of caution… once the game runners decide the jig is up, this will fall like a deck of cards. I am already in for a mid-sized position, and will be taking profits off the table if this does start a run up through a series of halts. I don’t have a target price, but once we see two halts, I expect we’ll see more: but will be selling off parts of my position out of each halt.

NOTE: This is NOT financial advice, and I am not a financial advisor: this content is meant only as information. Trading stocks, especially stocks like the ones mentioned in this newsletter, is extremely risky. I have already established a position in the equities mentioned in this newsletter and may liquidate my position at any time. Trade your own trade, do your own due diligence, and good luck in the markets.

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Low Float Sneaker IPO on watch for tomorrow… maybe…

Low Float Sneaker IPO on watch for tomorrow… maybe…

August 26th, 2021

Ok, so first, let me apologize for not sending out an alert on RNXT yesterday – the IPO was today, and it wasn’t worth playing in my opinion. While it was a low-float play with just 1.8M shares, it’s a biotech and the only opportunity turned out to be waiting for the open and subsequent drop, and be patient for an opportunity to buy at an extreme dip, then wait and hope for a rebound trade. Wouldn’t want to be stuck in it, and didn’t play it myself. Maximum play would have been to get in at $6.66 and out at $7.97, and timing those would have been pretty challenging and the conviction would have been pretty low. Better leave it be.

Tomorrow there’s another low-float IPO that just came up out of nowhere… it’s for a company in the genomic sequencing field, which is a pretty hot industry full of large competitors. They make DNA and RNA sequencing machines that have been used at Harvard and other research institutions largely used for cancer research.

I’m talking about SeqLL … and the ticker is slated as SQL.

The company originally attempted to IPO in April 2021, with the goal of boosting marketing – but I couldn’t find much else on why they withdrew. In fact, there’s not much information about the company available on the Internet, and even less about their IPO.

In their initial S-1 filing, they claimed revenues of $779k in 2018 down to $257k in the first half of 2019.

Also notable is that this IPO is showing as still available for order on ClickIPO, and is not appearing on any of the primary IPO calendars (it was brought to my attention from one of the members of the IPOWarrior Reddit thread.

I’m a little skeptical that this IPO will actually debut tomorrow, and without any public promotion of their debut, wouldn’t really expect it to fly off the debut. While gene-editing in general has been pretty hot, companies like DNAY have not done well from their IPOs, though I guess that’s more like sythetic biotech.

The only thing particularly interesting about this play is that the float is listed at just 2.3M shares, and the underwriter is Maxim Group, LLC – whose IPOs have not necessarily done incredibly well off the debut, but some (including RGC last week), have made some suspiciously aggressive moves in the weeks or even months following their debuts.

I doubt I’ll be playing this one off the debut – but will keep an eye on it and wait to see if any trading groups start bringing volume into this one on any sort of bottom.

Note: I am not a financial advisor and this is not trading or financial advice. I may take a position in the securities mentioned in this article within the next 72 hours. This is all just for informational purposes – trading in the stock market is risky. Good luck.

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What Time does an IPO Start Trading?

Using Benzinga Pro to Know What Time Does an IPO Starts Trading

One of the questions I get asked all the time is, “What time does XXX start trading?”

If you’ve never played an IPO on its stock market debut, you probably assume that the stock will begin trading at the market open on the day of its IPO. You log into your trading platform, and see the IPO price, maybe you even enter an order hoping to buy it right at 9:30 AM EST.

The opening bell rings, but to your dismay, nothing happens. You refresh your screen, but all you see is the IPO price, and no movement in the stock. Confusion and frustration set in, and you start wondering if something is wrong with your account, or maybe you made a mistake and it’s the wrong date.

But eventually you figure out that despite being the right date, newly minted IPOs do NOT begin trading the minute the stock market opens. So what gives?

When is this stock going to be available for the general public to buy?

Along with other helpful live news updates on IPOs provided by Benzinga Pro, the information on WHEN an IPO debut would open for quote, along with an estimate on when it would start trading, has been a very valuable piece of information to help me schedule and organize my time on key IPO plays.

So here’s the deal, there is no set time at which an IPO will begin trading on the public market.

How can that be? Well, there is a process by which the underwriters and market makers will be pairing shares from those who bought the IPO and want to sell right away with buyers who want to purchase the IPO immediately on the debut.

And they will take as long as they need to in order to balance the number of shares being offered at a given price against the number of shares with buy orders for those shares (at that price). During this time, the ‘indication price’ will inevitably fluctuate quite a bit as they test different price points and buyers and sellers jockey their orders accordingly.

This is not a post about setting your order to make sure you get in at the debut price – I’ll cover that later. But it is helpful to get the information on WHEN the shares will begin pricing, as this will allow you to start watching the indication price and adjust your Limit Order accordingly in order to make sure you buy in the moment the stock does eventually go live.

Unfortunately, there aren’t too many resources that allow you to get this information. The one source that I rely on for this information is Benzinga Pro (you can signup using this link here:

GET BENZINGA PRO

To get the opening bid time, you can use the ‘Newsfeed’ tool and enter the ticker for the stock you’re wanting to watch.

While this information is not provided for every IPO, it does appear for most of them, and it helps me make sure I don’t miss the opening quotes, especially on days where there a multiple IPOs that I am trying to trade.

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Stealth IPO Alert – June 30, 2021

Stealth IPO Alert – June 30, 2021

June 30th, 2021

Stealth IPOs are risky debuts that are typically introduced without much promotion and are announced just prior to their debut. We’ve seen debuts like WNW, UTME, TIRX, and rocket off their debuts, while others like JZXN fall straight from $45 to $17.

The key to playing these debuts is to avoid insane debut premiums, and EXPECT an upward halt out of the open. While a debut premium of 100-200% may seem extreme for most IPOs, its’s somewhat expected for Stealth IPOs, but if we see a debut premium of 500% or more, whatever scam is behind these pumps has likely already been baked in, and the stock is not going to offer much upside. Still, even a highly pumped debut premium like JZXN offered a brief window for quick hands to exit their position for a small win. Again, if the stock does not immediately halt upwards, you need to get out…

Ok, so now for the background on tomorrow’s Stealth Watch IPO…

The stock I have identified as a potential stealth launch, is a Chinese entertainment company that promotes hip-hop through events both online and in live venues. In fact, this probably doesn’t really matter as much as the fact that this company’s IPO is underwritten by Network 1 Financial – the same company that brought us TIRX, AUVI, and others like last week’s ACXP… which didn’t halt but gave a nice day-long win as it ran from $5.95 to over $8.00.

Furthermore, this relatively unknown company did $19M in revenue in 2019 with $3M in profit, and even during the 2020 pandemic did $15.6M in revenue and $2.6M profit. With a relatively low float of just 6M shares, this one is primed to ‘pop’ off the debut, so keep an eye out for Pop Culture Group (CPOP) tomorrow morning – I expect it will debut rather early, as we have a full slate of IPOs including some blockbuster names that will take longer to pair trades.

Anyway… Good luck out there.

NOTE: This is not financial advice and I am not a financial advisor. I do intend to take a position in this security within the next 72 hours, and reserve the right to change my mind at any time. This is for informational purposes only – trade your own trade, and good luck!

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Suspicious IPO Setup on Watch – May 27, 2021

Suspicious IPO Setup on Watch – May 27, 2021

May 27th, 2021

I’ve just uncovered an IPO that has been filed but not yet priced, and no date has been announced for the debut. So we don’t know for sure if this is going to attempt to go live in ‘Stealth Mode’, but it has me excited, and I’ll be tracking this one for a possibly explosive debut.

Let’s first check out why this stock has raised my suspicion:

  • It’s a Chinese Company. What do they do? Education, but that’s not really the point. We’ve seen recent Chinese IPOs for Janitorial and Appliance services jump 900% (EJH), and others that are OEMs for cell phone manufacturing jump nearly 1000% (UTEM)… as well as an insurance company that went from $17 to $50 in a single halt (TIRX)…

  • Low float. The float on this one is 5M shares, which is consistent with many of these low-float stealth IPOs.

  • Priced at $4-5 per share. Also consistent with the stealth IPO profile.

  • Now, this one’s really important: The underwriter is Network 1 Financial Securities… the same company that provided underwriting for TIRX.

  • The filing for this Company was initially registered on May 7th, 2021. The same date as Singular Genomics (which debuted today)… for reference, other IPOs that debuted this week filed between May 3 – 7, including FLYW (May 3), DAWN (May 4), FIGS (May 5), OMIC (May 7).
    So given the timeline, we could expect to see this stock debut this week.
    NOTE: Fridays have been especially ripe for Stealth IPOs.

Ok, so I think I’ve strung this out long enough… the company I am looking at is

Golden Sun Education Group Ltd (GSUN)

There’s really no reason to go into what they do: they are a private education provider offering Spanish tutorial services in China. With one premium private school, three tutorial centers, one educational company that supports language studies for other schools, and a logistics company for schools. They are seeking to raise $28M through the IPO.
Their website is typical of these Chinese IPO companies: http://www.jtyjyjt.com/

Anyway, that’s not the point. The point is that it looks a lot like the other IPOs we’ve seen from random Chinese companies that have gone parabolic on the debut.

WARNING: SOME HAVE ALSO CRASHED.

Last week we saw JZXN crash from a debut of $45 with no reprieve for bag holders. And Network 1 has debuted other IPOs for education companies that have also flopped (HYW, CNEY, among others).

Then again, many of their IPOs have randomly spiked weeks or months after their IPOs… but that doesn’t mean I want to be stuck bag holding one of these.

Still, I’ll be keeping a sharp eye out for GSUN, and will provide updates to you all through this newsletter and on Twitter as I see further developments.

Stay tuned…

Note: none of this is financial advice… it’s for informational purposes only. Trading IPOs can be very risky. I am not a financial advisor, and as always, trade your own trade. Good luck!

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The Stealth IPO

The Stealth IPO

May 15th, 2021

Without warning, an IPO shows up on a random news ticker, chat group, or PR Newswire Release. Where did it come from? What is this business? Why would a company launch an IPO without promotion or hype?

The answers are somewhat unclear, but what is certain is that there are massive profits to be had for those who ride the wave of what appears to be clear evidence of a price manipulation scheme that drives the shares to insane multiples before eventually crashing down to more normalized valuations.

Recent ‘Stealth IPOs’:

Wunong Net Technology (WNW): This one caught me totally off-guard when it IPO’d on December 15, 2020: it wasn’t listed on the NASDAQ IPO calendar, and had not been mentioned by anyone prior to its debut. Day 1 was fairly uneventful, asides from an initial trading halt to the upside that appeared to fade out through the end of the day. The real fireworks started on Day 2 and carried into Day 3, at which the stock reached at peak of $160.02 before since declining all the way to its current price of just $6.97
At this point, I was aware that Chinese IPOs were possible targets for price manipulation, and I started playing them and paying attention to what was driving their insane moonshot behavior.

Tian Ruixiang (TIRX): I was working at my desk, when one of my Reddit Thread members posted the question… “Is anyone playing TIRX today?”
I was a little embarrassed that I was not even aware of this IPO, and after scrambling to look it up and do some quick research on the company, thought, “nah, some Chinese insurance company, not worth it.”
But with no other IPOs that day, and some interest from others in the chat group, I decided to play it for 1,000 shares. I ignored the fact that it was priced at $5 per share and indicated up at $16.00 and went all-in more or less.
Glad I did.
After debuting at $16.00, it shot up into a halt at $17.80, and what followed was an uncommonly long 3 hour trading halt. I got a bit spooked, and decided that I’d exit my position immediately off the halt, and set a Limit Order at $19… the stock opened at $49.99 and again halted, but not before my order was filled for an absurd $33,000 win!

Again, I still hadn’t connected the dots to understand what was driving some of these low-float, unknown Chinese IPOs to the moon, but I was set on playing them as often as I could. Some were losers, and many did pop off the debut but did not post the monster runs that WNW and TIRX had offered.

Then, just yesterday, I passed on another huge runner, with EJH. I passed on it simply because there had been absolutely no trace of this IPO on any social boards, and it wasn’t even showing up in the NASDAQ IPO calendar.

What I didn’t understand, was this was actually the signal that I absolutely should have played it with a full clip of ammo!

Utime (UTME): This one showed up in my trading platform’s IPO Center (WeBull) on the day of the IPO. A quick Google of the company yielded no press coverage and Twitter was silent on the listing. The market wasn’t particularly hot that day, and I didn’t feel like taking a loss on an unknown Chinese mobile phone OEM, but didn’t want to completely miss out, so I threw my hat in the ring on 100 shares at a debut price of $11.00, and was happy to exit out of the initial halt with a nice little 35% win. Imagine my confoundment when the stock ripped into 9 consecutive upwards halts… and then continued rising up to a peak of 107.33
Whoah… I still hadn’t quite recognized that the lack of publicity was the giveaway.

E-Home Household Service Holdings (EJH): In case you missed it, like me, EJH opened up at $16.60 and peaked at $67.85 – it looks like it might run further on Monday, but I’m not touching this one at this point. The company itself is some kind of network of appliance repair and maid service in China (with a business registered in the Cayman Islands). It wasn’t on any IPO calendars prior to Friday, and is still not showing on the NASDAQ list of recently priced IPOs.

So what’s going on here?

Well, it certainly appears that the stealth debut is intentional, and given the insane spikes we’ve seen in the share prices, it appears that some kind of intentional price manipulation is going on. Who in their right mind would value an appliance repair/house cleaning company at $1.8B ?

Unlike low-float IPOs that have received some publicity that caused volume spikes, such as EBET and IFBD, these stealth IPOs traded up on relatively low volume. Sure, eventually volume showed up, as day-traders reacted to the trade-halts that appeared on various tracking services, Twitter, and elsewhere. But where did the initial demand come from that drove those initial halts?

As I watched the tick-by-tick data for EJH in it’s opening trades, I noticed that these were relatively small volumes of trades, many trades of just a few shares, that drove the price up. This could rather easily be done by a handful of traders who were in on the game, and would cause an intentional spike by ‘laddering’ their trades.

I brought this question to a good friend of mine, who also trades in my IPO group, what he thought about this phenomenon. He’s digging into it further, but his initial reaction was to hypothesize that it was a form of money laundering. Moving money from one account to another by selling shares out of one account and buying them in another account. This would clearly benefit from having a stock to trade that is ‘under-the-radar’ and un-traded by the general public. Being an IPO, rather than some obscure penny stock, hides the spike in trading from being an anomaly that might otherwise bring unwanted attention from the SEC.

Another speculation is that it is simply price manipulation by traders close to the company or underwriters who are aware of the IPO and able to snatch up a significant amount of the float by bidding it up to an unreasonable price for any standard trader. Then they ladder trade it up into some halts, and await the oncoming rush of day-traders.

Conclusion:

I’ll continue looking into the dynamics behind the Stealth IPO, but this much is clear: when an unknown Chinese company announces an IPO on the day of the IPO, I’ll be buying in with a big position.

And yes, I’ll be sure to send out a newsletter the next time I see what looks like an attempt to launch a Stealth IPO.

Note: The contents of this email and all correspondence from IPOWarrior.com is NOT financial advice and is intended for informational purposes only. Trade at your own risk.

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