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IPO Preview for May 31 – June 4, 2021

May 30th, 2021

No word yet from Benzinga as to whether I’ll be appearing on Monday, as it’s a holiday. I’ll post an update to my Twitter feed along with a link if they confirm or reschedule.

Before we jump into the upcoming IPOs for this week, let’s take a look at the winning trades from last week’s IPO activity…

Paymentus (PAY) – debuted at $28.76 and gave a quick and easy run up to a peak of $30.46 for a modest, but easily played 4% win, best played with a trailing stop at $30.00, with a potential 6% win if you timed the top perfectly with a market or limit order… not easily done. I was anticipating a Day 2 run on this one, and perhaps a sound strategy would have been to sell half the position on this initial run, and then let the rest ride. I happened to hold it all, and was left bag holding until Day 3, but was ultimately rewarded with a hard-fought string of exits between $30.50 to $31.85. While still holding a small portion for a potential run next week.
Of note, when trading a low-float IPO, it’s important to recognize that one of the reasons a company debuts their IPO with a limited number of shares is likely due to lower anticipated demand. This is fine for trading the IPO, as the IPO itself will draw attention to the stock and provide initial volume. However, it is very important to recognize that this volume is likely to dissipate once the IPO wears off, and getting out of your position when there’s limited volume can be tricky.
I was fortunate that there was clearly demand for PAY on Day 3, but relied heavily on Level 2 Data (in WeBull) to recognize the price points where I was setting my Limit Sell orders to maximize profits. The spread between the Bid and Ask prices was quite substantial, which shows up on the charts as wild swings between prices, but in reality, is the result of just a few sellers jockeying their bids to undercut the other sellers while still keeping their bids above the low-volume sales orders. Patience and diligence are key to maximizing profits in this situation, and waiting for the final hour of the day often provides the slight surge in demand that will give you the best opportunity to cash in.

ZIPRecruiter (ZIP) – This direct listing gave a surprisingly smooth ride into easy profits for those who played it, debuting at $20.00 and rebounding off a short initial dip to $19.32 into a steadily climb up to $21.69, before falling below VWAP… and then recovering again up to $21.50 before cupping out for the remainder of the day: bottoming out at $19.65 but regaining momentum into a $21.10 close. No, this wasn’t a massive winner, but with hardly any movement below the debut price, ZIP was a comfortable ride that allowed traders to get off at any point with modest profits. Even Day 2 offered a run back up to $21.76 and didn’t drop below $20.00 at any point. Basically, no real loss potential with the comfort of taking your money off the table at any point with slight profits.

FIGS (FIGS) – I was a little disappointed that ETrade snubbed me (again) in my allocation request for FIGS, but even more frustrated when they seemingly forgot to remove the pre-debut restriction on placing limit orders for the stock and failed to open the stock for sale orders until FIGS had already been trading for 10 minutes!
Nonetheless, FIGS debuted at $28.30 and bounced its way up to an initial peak at $30.92 within the first hour of trading. Those who held their conviction play into Day 2 were rewarded with a peak into the close of $34.37, with further gains into after hours reaching $34.78. The win potential on FIGS measured 23%, with what is currently looking like it could run even higher next week.

Centessa Pharmaceuticals (CNTA) – As a rule, I generally stay away from pharma plays, and was too busy steering myself out of my position in PAY to play CNTA, but it would have been a good one on which to break my ‘no-biotech rule’. CNTA looked promising given the corporate profile and low debut price relative to the IPO price. CNTA debuted at $20.25 (just $0.25 above the IPO price), and immediately ran up to $22.67, giving ample opportunity to snag an easy 10% win right out of the gate. It never retraced below $21.00, so even a moderately tight stop-loss set just below $21.00 would have given CNTA room to run. I like to think that if I had played this one, I would have taken 50% of my position out at $22 and let the rest run. The next obvious exit would have been at $24.00 with a trailing stop loss, as it then peaked at $24.83 before trailing off into a close of $21.75, though not before given a subdued rally to $23.36 in the final 15 minutes of trading. To summarize: no loss potential, with a maximum upside potential of about 22%.

Ok, Now let’s look at the IPOs ahead for the week of May 31 – June 4, 2021

Well, there’s just one, really:

dLocal (DLO) – June 3, 2021
dLocal is a Uruguayan based tech company that provides online payment services for emerging markets in 29 countries, and counts tech giants such as Microsoft and Amazon among its clients. For example, they help Microsoft accept payment for Microsoft products in Nigeria, and China’s Didi (ride-sharing) accept payments in Argentina. While this may sound a bit random, business is booming for this profitable SaaS payment gateway provider, with an eye-popping 171% net revenue retention rate, and revenue growth of 124%, with profits up from $11M in the three months ending March 31, 2020 to $23.3M for the same period ending 2021… an increase of over 110%.
When I look at the performance of GLBE since its IPO a couple weeks ago on May 12, 2021 – which debuted at $24.22 and is now trading at $32.86, it’s hard not to be excited about the prospects of a pop on DLO’s debut.
The only warning sign on this one is the projected valuation of 39x revenue given the projected IPO valuation. However, given the recent performance of GLBE and PAY, I see no reason to sit this one out, and with no other IPOs on the calendar for this week, we could see the added focus give this an extra boost.

ok, I know, I know… what about the “Stealth IPO” I teased about last week?

Yes, I’m keeping an eye out for alerts on Network 1 Financial and Golden Sun Education Group (GSUN)… of course a true Stealth IPO could show up on any date, so I’ll be watching for other signs as well, but this one looks primed for a secretive debut, so keep an eye on your inbox for ongoing announcements.

So yeah, I get asked this all the time: ‘Is this financial advice?”
My answer is always the same, “No, it is NOT financial advice… it is just information.”
What you do with this information is entirely up to you. You can ignore it, you can use it, you can reject it, you can even re-state these ideas like they were your own original ideas. That’s life. You can’t blame anyone else for your losses, and ultimately, you get to take all the credit for your wins, just the same as whether you got the ideas from someone else, or received them out of thin air, or discovered them from a horoscope or from reading tea leaves.
Anyway, good luck this week Warriors, and stay tuned for updates!

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