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IPO Warriors IPO and LPX Preview for August 8 – August 12, 2022

IPO Warriors IPO and LPX Preview for August 8 – August 12, 2022

August 8, 2022

The IPO market is rocking: HKD set the market for low-float stocks on fire, and MEGL delivered an encore that has carried the momentum to a new level in insanity. The flames quickly spread to virtually every recent low-float IPO on the market, and the hype surrounding this basket of stocks does not appear to be abating any time soon.

But as with every cycle in the stock market, once a play becomes too predictable, the setup gets ruined. In the case of IPOs, when too many buyers pile into the opening print, we see ridiculous debut premiums at unsustainable levels that can force a halt up, followed by a violent sell-off that triggers “the halt of death” scenario, whereby the opening price from the halt is significantly lower than the halted price, and further downside comes as buyers panic sell out of their positions.

Recognizing that there is much more than simply a low-float behind the setups we saw with HKD and MEGL will allow us to recognize the difference between these and othe setups, so as to avoid some of the potential pitfalls in the next slate of IPOs on the calendar. At this point in the cycle, we’ve got a lot of confidence and enthusiasm from traders who banked on MGAM, MAIA, and even BRSH following HKD’ massive run, not to mention MEGL, which may have done the disservice of convincing many traders that these types of debut runs are normal off insane debut premiums.

So the goal of this week’s analysis is to help identify which, if any, IPO debuts have a shot at delivering massive gains, which ones are more likely to set greed traps, and which are outright losers (and where we might still find opportunities to profit from trading the swings in all setups).

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This Week’s IPOs:

  • bioAffinity Tech (BIAF) – July 22, 2022 | 1.5M Units

  • Forza X1 (FRZA) – August 11, 2022 | 3M Shares

  • CorpHousing Group (CHG) – August 12, 2022 | 4.285M Units

  • Jianzhi Education Tech (JZ) – Possibly this week | 5M Shares

  • Onfolio (ONFO) – Also maybe this week | 1.77M Units

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IPO Warriors IPO and LPX Preview for August 1 – August 5, 2022

IPO Warriors IPO and LPX Preview for August 1 – August 5, 2022

August 2, 2022

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To put it bluntly, AMTD Digital’s (HKD) IPO has dramatically transformed the low-float IPO landscape since it charged from the already absurd level of $49 on July 27, 2022 to nearly touching $1,000 on August 1 (after pricing their IPO at $7.80 and debuting on July 15, 2022). In the same way that GME’s historic short-squeeze set off a barrage of imitation squeezes on all highly shorted equities back in January 2021 and continues to trigger insane runs in various iterations across SPAC, bankruptcy, and other incarnations – HKD has already inspired pumps in recent low-float IPOs and is likely to encourage traders to pile into upcoming debuts in hopes of catching the sequel.

The FOMO and MOMO (FOMOMO) are likely to provide enough impact to concoct a series of self-fulfilling prophesies in fresh low-float IPO issues, at least for the short term, and until enough day traders figure out how to buy he debut to the point where lofty debut premiums wash out any potential upside as the trade gets front-loaded and played out. Those of us who have been trading these setups for a while understand that there are huge differences in how these deals are distributed through the brokerages that have a major impact on how each IPO will trade, and there are quite a few hints in the pre-debut imbalance of each IPO to clue us in on how well it will perform.

For example: in the case of HKD: apparently the underwriters announced the issuance of 16M shares, “allocated” them to brokers, and then pulled their ADS (never actually delivered the shares). Brokers clients then called in to sell their shares, brokers sold, and then never got their shares, so they were put into short positions. With 88% of the shares held by AMTD, all they had to do was hold their shares tightly, and sell them to the manufactured shorts as the share price skyrocketed.. that’s one theory anyway. But points out that we are unlikely to see this setup repeat itself, and so the hope that we’ll see “the next HKD” is rather wishful thinking.

But we are likely to see intense demand for the next few low-float IPOs, which, by nature, are limited in supply to begin with. When demand exceeds supply, prices go up, and so I expect some prime opportunities in upcoming debuts. Add a Stealth element to the mix, and those are the trades where I’ll be looking to take larger position – provided I get the debut setup I have learned is typically correlated with a substantial upside run.

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Live IPO trading and commentary on upcoming IPOs will be reserved for Premium Members within the #premium-members-room.

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This Week’s IPOs:

  • Bruush Oral Care (BRSH) – August 2, 2022 | 2.47M

  • Magic Empire Global (MEGL) – August 5, 2022 | 5M Shares

  • Onfolio Holdings (ONFO) – August 5, 2022 | 1.7M Units

  • Jianzhi Education Tech (JZ) – TBD | 5M Shares

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Unfounded Conspiracy Theory on HKD and Why Not to Short Chinese Stocks Right Now

An Unfounded Conspiracy Theory on HKD

And why shorting Chinese stocks could be a very dangerous move right now.

July 29, 2022

We all just witnessed one of the most insane IPO debuts in recent memory, with AMTD Digital (HKD) going on a tear from pricing at $7.80 on July 14th, 2022, debuting at $13.00 the following day, and proceeding to hit a high of $485 on July 29th, 2022. That’s a 3,630% gain in basically two weeks: enough to turn $1,000 into $37k had you played the debut at $13 and held all the way to the top.

For those of us who regularly trade these low-float, typically Chinese IPOs, we’re used to extreme volatility: IPOs that price at $4-5 typically debut anywhere from $15-40, and we’ve seen a handful of them run up over $50 within a day or two of the debut. I’ve referred to them as “Stealth IPOs”, and have made a small fortune trading them. I even managed to identify HKD as a Stealth IPO, and bought in on the debut at $13 – though I took quick profits at $15 and only regret not having held into the $20s (there’s no way I stay in this one past $50 even in my wildest dreams). But looking back at the setup, perhaps it should have been more obvious that this one was poised for a massive runup, given the premise that I believe is behind these seemingly irrational runners.

To put things into perspective, this is not the first Chinese company’s IPO to rip from single digit IPO pricing to triple digits in a short time frame: WNW was the first one to really catch my attention, but looking backwards from there, I’ve found instances of similar setups going back to 2017. WNW snuck onto the IPO calendar in December 2020 and debuted at $7… three days later it peaked at $160.68 and currently trades at $0.68. I had just started trading IPOs, and was miffed at how I had missed this one, and even more confused when I began researching it and found out it was simply a Chinese traditional medicine vendor. Things didn’t make sense.

A few more passed, and I started setting up alerts to catch all IPO pricing events, and began picking up on some consistent elements of these deals: primarily the underwriters, and the fact that they’d debut with little to no press releases: uncommon for IPOs where drumming up investor interest in presumably a desirable objective. Even more uncommon was the nature of these businesses: insurance firms (TIRX), music labels (CPOP), even an actual house cleaning company (EJH) – once I got the hang of it, I nailed a few of them for inumaginable gains on companies I had never heard of knowing their stocks were worth $1 at best. This was not investing, this was trading on the back of something I only had a suspision about what it was about.

The best hypothesis I could come up with, was that this was simply money laundering – as I explained in The Stealth IPO article (link above) – simply put, wealthy Chinese who want to get their money out of China open accounts outside of China, assign IPO shares to those accounts, and then buy back those shares at ridiculous prices from their Chinese accounts to effectively transfer money out of China. Once they’ve reached their goals, they sell off the rest, likely shorting along the way, and we see moves like TIRX: going from a high of $97.92 on April 12, 2021 to a low of $12.15 the same day on no news catalyst whatsoever. It currently trades at $0.71. On the same day HKD touched $485, another recent Stealth IPO – VRAX, made it’s all time high at $29.00 after pricing at $5.00 a week earlier, only to close the day at $5.40 – an 81% drop.

Chinese Social and Political Unrest

If you’re paying attention to the political and social events in China, you’re probably already aware of the crackdown by the PRC on wealthy Chinese entrepreneurs: Jack Ma (CEO of Alibaba), was promptly smacked down after proclaiming that the Chinese government should be more progressive in its economic policies – the result was a forced withdrawl of Ant Financial’s IPO, and just today Ma announced he ceded control of Ant Group entirely.

Didi Global, after shunning Chinese exchanges against the wishes of the governemnt, debuted it’s IPO on the NYSE on June 30, 2021, only to be hit with a severe crackdown on it’s mobile app by the PRC, presumably for violating privacy laws, and was subsequently de-listed from the NYSE and is now planning to attempt a primary listing on the Hong Kong Exchange.

On to of all that, there is social turmoil brewing in response to a scandal over frozen Chinese bank account, unreset over COVID lockdowns, and ongoing disparity between the rich and poor. Enough to make any wealthy Chinese eager to expatriate whatever fortune they’ve amassed over the previous decade to non-Chinese controled institutions.

Oh, and one more thing – there may be an imminent war to reclaim Taiwan.

Back to the Stock Market

So what does all that have to do with AMTD Digital (HKD) stock?

Most of the Stealth IPOs we’ve seen come to market have contained a float of around 5M shares. HKD’s IPO brought 16M shares to issue – yet only 15k shares traded on the opening debut trade. Artificially constraining the float is a great way to force the price up – the higher the price goes, the easier it is to launder money through the market. The fewer outside buyers jump into trades on the target stock, the more efficient the process becomes. Who’s buying HKD over $100 except for insiders intentionally ‘losing’ money in the process of handing over funds from one of their accounts to the other (and presumably shorts getting squeezed along the way)? No one is, it’s all an inside game at that point.

So Where is HKD headed?

Well, if history repeats itself, this stock with eventually trade well below its $7.80 IPO price. So why not just short this thing and wait out whatever dip is just around the corner?

Well, for one, the insiders who are controlling this trade can hold out for as long as they like, and even drive the price up even further. Additionally, the borrow rate for shorting HKD is presumably quite high, and here’s where we could see the ultimate trap.

With the possibiity of a war between China and Taiwan brewing, and tensions heating up over the Taiwan straight, taking a short position on any Chinese stock could be a nightmare for investors – take a look at what’s happened with Russian stocks, such as CIAN, which have been halted since the Russian invasion of Ukraine on February 24, 2022. If you shorted it up over $9 on February 16, 2022 at $9.17, you made a great call: it closed at $3.31 on February 24 … if you didn’t close your position on February 24, then you are still stuck in the trade, as it has been halted since then. The issue here is that the borrow fees you’re paying have likely eaten up any profits you may have taken on the trade.

So shorting Chinese stocks, espcialy HKD, could be a disaster if war breaks out and forces them into never-ending halts.

Is it possible that AMTD shareholders know of something on the near-term horizon that could invoke such a situation? Ok, I know, flat out conspiracy theory, and I truly hope I’m way off base here, but stranger things have happened.

China’s “Lucky” Number – 88

So just to get completely wild with this – China is incredibly superstitious about numbers, with the number “8” being highly auspicious, and double 8’s being considered very lucky (the number 8 is pronounced “ba” which phonetically sounds like the word “fa” which means to make a fortune. In this line of thinking, August 8th would be 8-8, and perhaps would be a good time for China to reclaim Taiwan.

Ok, not gonna put too much weight on that, but let’s at least recognize that wealthy Chinese are likely feeling growing pressure to get their funds out of China, and the longer they wait, the more likely they are going to possibly be forced to relinquish or otherwise have their funds sequestered by the government.

Will There be Another HKD?

Yes, I believe there will be several coming up. I’ve traded, or watched nearly every Stealth IPO that has come to market in the past 2 years and have made a small fortune anticipating their moves. In the upcoming weeks, I will analyze and report my findings in the IPO Warriors Premium Newsletter, as well as host live-trading of these IPOs in Private YouTube streams.

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IPO Warriors IPO and LPX Preview for July 25 – July 29, 2022

IPO Warriors IPO and LPX Preview for July 25 – July 29, 2022

July 25th, 2022

What more is there to say about the state of IPO trading these days: there are Stealth setups, and there are “The Rest”. “The Rest” have been on a continuous conveyor belt of reschedulings and pulled deals – the Stealth IPOs have delivered winning opportunities for just about every play: and outs for any potential miscues that have given patient bag holders plenty of forgiveness provided they exercised a bit of patience and were paying attention when their chance to exit at a non-loss – or even a profit – emerged (I should know, I’ve managed to turn red positions into green on a couple of these myself).

The other opportunity that has been delivering with some degree of regularity in IPO Land is the Lockup-Expiration play (“LPX”) on recent low-float IPOs – which again delivered on-time with TKLF entering LPX on Monday last week, and dropping PR on Friday: sending the stock from the $1.50 level to over $2.70 the day of the news drop. Going forward, I’m sniffing out Stealth IPOs, looking for reversal-rallies on broken IPOs, and scraping up potential LPX plays at bottoms (often selling out for 10-20% gains without any PR hits). In this market, there may be long-term bargains in beaten down growth and tech stocks, but with short term gains readily available in IPO plays, I’m primarily sticking to these trades.

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This Week’s IPOs:

  • Mobile Global Esports (MGAM) – July 29, 2022 | 1.5M Shares

  • MAIA Biotechnology (MAIA) – July 29, 2022 | 1.67M Shares

  • bioAffinity Tech (BIAF) – July 29, 2022 | 1.5M Units

  • Onfolio Holdings (ONFO) – July 29, 2022 | 1.7M Units

  • Jianzhi Education Tech (JZ) – Sounds like this one has been pushed back

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IPO Warriors Premium IPO and LPX Preview for July 18 – July 22, 2022

IPO Warriors Premium IPO and LPX Preview for July 18 – July 22, 2022

July 18th, 2022

We still aren’t seeing enough stability in the market for mainstream IPOs to venture forward with their initial public offerings, but there is some indication that once the bottom is established, a backlog of popular names should be prepared to initiate their IPOs. Low float IPOs continue to be the best game in town, with both new debuts and recently launched offerings popping for substantial win opportunities.

Perhaps one benefit of these tepid market conditions, is that low-float IPOs that do not have a seemingly manipulated book are remaining on the sidelines, while those that are of the ‘Stealth’ variety debut unphased by diminished demand from both retail and institutional ‘investors’. These have become targets for day traders, pumpers, and the nature of their setups have provided relatively easy-to-read debuts. Those will be the plays we try to identify in the upcoming weeks, and will be ready to pounce on those debuts if we get the right setup in the pre-debut indication setup.

Remember to join the IPOWarriors Discord Channel for daily trading activity:
Live IPO trading and commentary on upcoming IPOs will be reserved for Premium Members within the #premium-members-room.

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This Week’s IPOs:

  • Virax Biolabs (VRAX) – Jul 21, 2022 | 1.35M Shares

  • bioAffinity Tech (BIAF) – July 22, 2022 | 1.5M Units

  • Wearable Devices (WLDS) – July 22, 2022 | 3.6M Shares

  • Beamr Imaging (BMR) – Week of July 18, 2022

  • Jianzhi Education Tech (JZ) – Week of July 18, 2022 | 5M Shares

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