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Coinbase IPO Followup,
and What’s Next on the IPO Calendar

Coinbase IPO Followup,
and What’s Next on the IPO Calendar

April 14th, 2021

The Coinbase IPO debuted amongst a frenzy of media hype and retail anticipation, and market sat on the edge of its seat wondering at what price the stock would start trading. Estimates generally ranged from $350-450, with some predicting runs to $500 or more.

After nearly 4 hours of waiting for the stock to open trading and seeing the indication price rise from $350 to as high as $383, COIN debuted at $381.00 and strung together (about) 10 green candles to reach a high of $429.54…

… and then carnage ensued.
COIN swiftly dropped down to VWAP at $394.03 and traded sideways for another 10 minutes or so, before dropping into a virtually unfettered slide all the way to a bottom of $310 before bouncing up to $344.78 and then declining to close at $328.28

For those who played this debut with a raising stop loss, or picked off a 10% target with a limit order set at $420, COIN offered an ideal play. For those who held through in hopes of a Day 2 Run, the heat has been intense, and bag holders are digging in for what looks like could be a long hold. However, Day 2 pre-markets have bailed out many hot IPOs that looked like failures on Day 1 – see Unity (U) and C3.ai (AI) for prime examples.

In the long run, however, COIN looks like a solid hold as long as BitCoin and cryptos continue to show strength and further adoption by financial markets. One bullish hypothesis might recognize that insiders dumped on Day 1, while institutional investors held off to see what happened, and once the initial retail demand was satisfied, the stock dropped dramatically. After insiders are done with their initial selloff, expect the big money to move in: without any pending lockup period, pending followup offer, or massive crash in the crypto market, we should see COIN make a run upwards from here.

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Featued IPOs for April 15, 2021

There are two IPOs I”ll be focusing on tomorrow. One is ESports Technologies (EBET), which is an eSports and online gambling platform whose underwriter brought UTME to market last week to a massive runup. The key here is the super low float of just 2M shares, and a retail shareholding group that is likely anticipating a series of halts with the hope that they will be able to score a 10x win along the lines of what UTME did off its debut.

The other IPO for tomorrow that is particularly interesting to me is Karat Packaging (KRT) – showing a float of 3.95M shares on the NASDAQ chart, and 5M shares on WeBull. Karat manufactures environmentally-friendly disposable foodservice products (plastic forks and knives) for major chain restaurants including In-and-Out Burger, Applebees, Chipotle, and others.

When a small float stock debuts, there is a very high chance that it will instantaneously trade up into a halt, and sometimes multiple halts. One strategy is to sell a portion of your position coming out of each halt, depending on the Bid Price you’re seeing in Level 2 Data during the halt. I would be very surprised if EBET did not trigger a series of halts, and will begin exiting my position after the second halt, and ultimately will hold whatever is left until Day 2. KRT may not get the same amount of attention, but still likely to get pushed up with any sort of demand, in which case I will play this with a trailing stop loss.

NOTE: This newsletter is intended only for informational purposes and is not financial advice. I am not a financial advisor, and you should trade at your own risk.

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Coinbase IPO Preview April 13, 2021

Coinbase IPO Preview April 13, 2021

By Matt Hammond (AKA ‘The IPO Warrior’)

Preview

Coinbase (COIN) is undisputedly the hottest IPO since Snowflake (SNOW) and the timing of its debut on the NASDAQ could not be better. Bitcoin recorded all-time highs today, and digital assets such as NFTs have been in the spotlight for the past month, with even the New York Stock Exchange announcing that it will be releasing a series of NFTs to commemorate the first trades of popular recent IPOs.

Coinbase makes money on fees and commissions paid by customers when they buy and sell Bitcoin and other crypto currencies through their wallets hosted by Coinbase – typically in the range of 0.5% per transaction. It ranks as the second largest crypto trading platform in terms of crypto trading volume, following behind Binance.

Details of the Listing

Technically, COIN will debut as a direct listing, meaning that it is not issuing new shares, and is not raising any funds as part of going public, and there is no lockup period that will prevent existing shareholders from selling their shares tomorrow when it begins trading. It also means that Coinbase won’t be paying tons of money to underwriters to handle the IPO, and indicates that it is financially stable enough to forgo any fundraising or dilution as part of the process of entering the public markets.

This is particularly important when considering whether to play the debut of COIN right off the debut, as it means that institutional investors will not get to buy into their positions before retail traders. With typical IPOs, underwriters (Goldman, Merrill, etc) sell IPO shares to institutional investors (Pensions, Investment Banks, Hedge Funds, High Net-Worth Individuals) the night before the IPO is offered to the public. But retail traders are not able to buy the stock until market makers determine the sell-side and buy-side demand, through a process that tests increasingly higher prices against retail demand until the stock debuts: typically, at a sharp premium. Snowflake, for example, had an IPO price of $120, but debuted on the market for retail trading at $245.

The debut is expected to issue 114.85M shares with a reference price given by the NASDAQ of $250 per share. However, estimates for where the stock will actually debut range from $350-450 or even higher.

Fundamentals

Estimated valuations of Coinbase hover around $100B – but that could radically change if the hype surrounding its direct listing play out to their full potential, which seems likely given the frothy amount of hype this even is garnering in social media and in the news.

Last week, Coinbase reported revenue of $1.8B for the last quarter (Q1): up 900% from the previous quarter, and net income increased $32M to $730M-800M from Q1 last year. For 2020, revenue increased 100% to $1.28B, and the company generated its first profitable year on record with $322M.

Coinbase claims over 56M customers, up 30% in the last 3 months, supports over 7,000 institutions, and is partnered with over 115,000 companies in over 100 countries. It accounted for roughly 0.57% of the trading in cryptocurrencies in 2020.

Interestingly, Coinbase employees have worked exclusively from a remote working environment since the start of Covid, a move which management has indicated maintaining in an apparent bid to reduce overhead.

Risks and Pitfalls

Risks associated with Coinbase include the following:

  • Bitcoin itself is not a practical transactional currency, and has no real intrinsic value. It could be worth nothing just as easily as it could be worth millions. If the price of Bitcoin substantially drops, it would pummel the share price of Coinbase along with all other players in the crypto sector.
  • Bitcoin is in the full throes of a bull-run, with Coinbase poised to debut at the height of a frenzy in digital asset markets. A pull-back or consolidation in the general crypto market, combined with the state of the current hype could result in a drop in the share price of COIN.
  • Governmental regulation or restrictions on the trading of crypto currencies could hamper or even eliminate demand and would have an adverse effect on COIN share price.
  • Any sort of security breach in the Coinbase platform would have dramatically negative ramifications on the stock price.

The Hype

This listing is quite easily the most hyped IPO of 2021, with significant coverage on every financial news outlet for weeks leading up to the direct listing date, and has been blowing up Twitter feeds and sending stock-trading live streamers into a frenzy. If you know anything about Bitcoin or the stock market, you know this event is coming, and are likely setting yourself up to buy the listing.

The only caveat here, is that most ‘financial expert’ types who are advising on this trade, and cautioning retail investors to consider waiting for the initial hype to die down a bit before taking a position in COIN.

That being said, when you look at the most recent direct listing with comparative hype – which was Roblox (RBLX) last March, you see that the debut price was close to the low since then: which ultimately happened only briefly on March 25th, when the entire market was in a slide, and immediately recovered and has run up to new all-time highs as of today.

Remember, with a direct listing, retail investors are on an even playing field with institutional money, and the debut price will likely act as benchmark for entering long trades.

Trading Strategies

Of course, there are an infinite number of trading strategies worth considering for any debut, but here are a few to game plan according to your risk tolerance and profit goals.

Entering the Trade

I’m not going to cover this in depth here, as I have reviewed this in great detail in the IPO Trading Guide available at IPOWarriors.com. But essentially, you’re going to set a Limit Order just above the indication price right, with the expectation that it will get filled the instant the stock begins trading and the hope that substantial immediate demand drives the price upwards from there.

Trailing Stop Loss

This strategy is based on the hypothesis that the stock will rise on the debut, and will continue rising up to a relative high peak before a retracement. With this strategy, as soon as the stock starts trading, you wait for the stock to go up a few dollars, and then set a Stop Loss order just above your entry price. As the stock climbs, you raise your Stop Loss price, until eventually a retracement stops you out of the trade at a profit. Upside is you have limited risk and you’re pretty much taking the decision of when to sell out of your own hands. The downside is that the stock could continue to reach higher peaks after a short retracement that stops you out of the trade.

Limit Order at a Target Profit

This is a great strategy for set-it-and-forget-it traders, and will reward those who are not greedy with a rather safe return on their trade. Once the stock starts trading, simply set a limit order for 10% or 20% above your entry point, and take profits when they come. If they don’t come, you’ll have to pivot to a new strategy, but your hypothesis is that this stock will run, and a 10% win on a highly publicized stock like COIN is relatively safe.

Day Trade

If you have familiarity with day trading, and know the terms “VWAP”, “Bollinger Bands”, “RSI”, or “Fibonacci Bands”, you can readily apply your day trading skills to attempt to identify and exit your trade at a peak.

Day 2 Run

Many of the most popular IPOs have peaked on Day 2 – including RBLX. Buy at the debut and wait until Day 2 to sell with a trailing stop, limit, or market order.

The Combo

I personally like to employ a combination of the above strategies, and exit the trade in multiple sales. For example, exit 40% of your position on a trailing stop loss on the initial spike, trade 30% out on a run above VWAP that peaks above RSI 70, and sell the remaining shares on the Day 2 Run.

Conclusion

If you’re a trader who plays IPOs, you’re frothing at the mouth to play the Coinbase debut, and have likely been telling anyone who will listen that they should get in on this one. If you trade cryptos, you’re also probably eager to buy COIN stock on Day 1, as well as just about every other retailer investor who’s in the market. While there are no ‘sure things’ in the stock market, when an IPO comes along that has this much retail interest, combined with the fact that it’s a direct listing, and riding a fully loaded hype train, you don’t want to be late to the station.

NOTE: The contents of this article are for informational purposes only, and are not meant as financial advice. I am not a licensed financial advisor, nor am I a professional athlete, celebrity, famous actor, or anyone else upon whose advice you should make financial decisions. Play your own trade, and good luck in the markets.

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IPO Overview for the Week of April 12, 2021

IPO Overview for the Week of April 12, 2021

Mon, April 12th 6:56 PM

IPO Schedule
Week of April 14, 2021

This week features a full slate of IPOs with a blockbuster Direct Listing to showcase the slate.

4/13/2021

ESports Entertainment (EBET) – rescheduled to 4/15/2021

4/14/2021

Coinbase (COIN)
InfoBird Co (IFBD)
Alkami Technology (ALKT)

4/15/2021

Karat Packaging (KRT)
TuSimple (TSP)
Apploving (APP)
Agilon Health (AGL)
ESports Entertainment (EBET)

Coinbase (COIN) is the most notable IPO of the week, as the world’s largest crypto wallet exchange goes public via a direct listing. With an expected share price set to debut above $350, many less wealthy investors will be waiting to buy fractional shares after the initial debut. Even without this, the hype and promotion around Coinbase is almost certainly going to provide ample demand to send this stock upward from the debut.

Last week, we saw the low-float phenomenon drive little known UTME from a debut price of $11.40 all the way up as high as $107.00 on a Day 2 rally. Day traders have been on the hunt for the next low-float play ever since, with eyes set on EBET (2M shares), IFBN (6M shares), and KRT (3.9M shares) for possible repeat performances. Shares of EBET and IFBN were offered on WeBull (via ClickIPO), and EBET shares sold out very quickly, whereas IFBN shares have been available as recently as 4/12/2021, indicating less demand.

We also have been informed that shares of APP are being offered to ETrade users for prospective allocation requests, which has typically indicated a weak likelihood of a debut spike when those allocations have been granted.

The TSP IPO is worth keeping an eye on, as interest in self-driving vehicles has been hot recently, though the past month has seen the Electric Vehicle and related companies cool off a big: including battery and LiDAR technology companies.

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Reminder: The content in this email is not meant as financial advice, and is for informational purposes only. Trade at your own risk.

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