Ok, so I haven’t sent out this week’s IPO newsletter yet, but am a bit pressed for time, and don’t want you to miss out this important news regarding TWO IPOs that are debuting courtesy of our favorite underwriter: Boustead Securities.
So what’s so great about Boustead? Well, they seem to specialize in low-float IPOs that go on crazy Day 1 runs: expect a high debut premium, multiple halts, and volatile price action. This is the underwriter that handled Stealth IPOs such as WNW, TIRX, EBET, UTME, MITQ, MYNZ, and a number of others that delivered tremendous win opportunities.
Don’t need to read too much into the financials or underworkings of the companies involved, suffice to say that these are risky plays, and you should expect volatility IN BOTH DIRECTIONS. The trade I look for is to buy a position on the debut, and expect the first halt to be upwards. At that point, you’re looking for Level 2 data to show you where the price is heading. If the buy walls are significantly above the halt price, expect another halt. If they are at or below the halt price, it’s probably already past time to get out. I find it wise to exit partially out of my position at each halt, and after 3 halts (the “Three Halt Rule”), I’m looking to exit my entire position, save for perhaps a token play at an end-of-day run.
So here they are:
Fresh Grapes (VINE) – December 14, 2021 |2.2M Shares
This is arguably the lesser interesting of the two debuts, though both are significantly oversubscribed, the company distributes low carb wine in the “affordable luxury” price range. This one is co-underwritten with Oak Ridge Financial and Boustead Securities both on the docket, and I’m not sure how this one will perform compared to the next one: which is likely to steal some thunder from VINE, though depending on which one launches first, we may see both do well. I’ll take a token position on VINE just for the fun of playing it, but certainly don’t want to miss out on SIDU.
Sidus Space (SIDU) – December 14, 2021 | 3M Shares
This one appears to be the main event: an ‘affordable satellite’ company that already has contracts with NASA and a CEO with bone fide credentials in the industry. The fact that they rather sneakily moved the IPO from Thursday to Tuesday (December 14, 2021), only makes me more excited about the prospects of this one, as they have tended to try and fake out the market with these low-float, high demand debuts. I have put in an allocation request for this one on WeBull (for $1k), but expect to get a minimal allocation of less than 10 shares: which is actually a good thing. When allocations are tiny, it indicates high demand, and means many retail traders – even those who received an allocation, are likely to increase their position on the debut.
Enter with a Limit Order ABOVE the Indication Price: on WeBull apps (desktop and mobile), we can usually see the indication price of the stock before it starts trading on the market. If you want to buy the stock the instant it begins trading, you need to set your Limit Order ABOVE the indication price BEFORE it goes live. I suggest giving yourself a healthy cushion on these, as they may jump the price right before it goes live. If these halt upwards on the debut, you almost certainly won’t have time to enter a trade after it goes live.
Exiting During Halts: So if we get what we expect from these, we will see a series of halts which could go either way. Once a security is halted, you’re not going to be able to sell it until the stock begins trading again, and once it comes out of the halt, you’re going to see high volatility, and it’s very hard to process your thoughts and enter a trade in that position: market orders are likely to going to give up a large spread, and limit orders can leave you holding a bag if it moves the wrong way. My approach is to set a Limit Sell Order during the halt if I’m ready to get out, and generally will sell a portion of my position out of each halt. In my experience, once a low-float IPO debut has reached the apex of its halts up, the next move is a sudden halt down (or series of downward halts).
Double Dipping: I have yet to successfully execute this strategy, but we have seen several low-float IPOs debut into a series of upward halts, and then reverse down into a baseline around VWAP (it’s chart an indicator – you can look it up). From there, we often see a strong run into the end of day (The EOD Run)… so I have fantasies of nailing the initial run up, then buying in again on the VWAP baseline, and holding it for an end of day run. The cherry on the top of the cake, would be to then buy on the early Day 2 pre-market dip, and hold for a Day 2 momentum run off the opening bell. But probably better not to be too greedy, and definitely don’t go turning a nice win into a loss or bag holding position.
Long Term Plays: I would NEVER EVER consider holding one of these for longer than a possible early Day 2 run. These IPOs are more likely to return to, and even below their IPO price within a week, if not sooner. These are like ‘musical chairs’ – when the music is over, well, you know the drill.
Anyway, good luck out there. I’ll be live trading these in the Reddit thread here:
And Remember: These are VERY risky. It is entirely possible that they debut at a high premium and sell off… manage your risk accordingly.
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 submitting an allocation request for a position in some of 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.