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IPO Trading Review for the Week of February 14, 2022 – February 18, 2022

February 20th, 2022

First Off: Priorities…

Just wanted to send an update to the IPOW Community on my personal status: as many of you know, I live in Kyiv, Ukraine with my wife and daughter and two dogs (Shiba Inus)… due to the political situation with Russia, we decided to pack much of our stuff, and drive out of Kyiv late on Sunday night a week ago (more like early Monday morning) and were posted up in Lviv, Ukraine last week. The idea has been to be out of Kyiv and closer to the Polish and Hungarian borders.

We then took a short trip up to Bukovel – a tranquil ski town set up in the Carpathian Mountains: about 4 hours drive from Lviv, with plans to assess the situation in Ukraine after this weekend and decide what to do next. It seems at this point that we will go ahead and set out to Western Europe – first to Poland and probably next to Portugal – in the next few days to see what Putin decides to do next.

As a result of being tied up with packing, planning, and executing our evacuation, I was unable to put together a weekly recap of the prior week’s IPO trades, and wasn’t been able to prepare a write-up for last week’s upcoming IPOs (I also skipped the Monday Benzinga appearance).

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But I’m still following the market, and wanted to do a quick catch up on last week’s action, and will do my best to get a preview newsletter out for this week’s IPOs. (gonna go back to the old format for now, and will resume the more comprehensive format once I get settled in place again).

Ok, Let’s take a look at what happened last week in IPO Land:

Meihua (MHUA) brought us the first Chinese IPO since the SEC decided to put a halt on new listings from Chinese companies after DIDI pulled an unprecedented move and announced it would de-list from the NYSE just weeks after it’s IPO. At first MHUA’s debut signaled a broken start – as it opened trading at the IPO price of $10.00 and immediately sold off, likely by retail allocations that were unhappy with the lack of any kind of debut premium. The low-float then appeared to kick in as it It then quickly rebounded back up from a bottom of $8.42 into a halt at $10.48, and proceeded to embark on a series of up/down halts that ultimately culminated in a peak of $14.80 before stabilizing in the $12-13 range. Hopes of a continued climb throughout the day materialized only through a short lived run back up to $14.44 before again leveling off between $12.20 and $13.00, closing Day 1 at $12.92.
Day 2 provided more volatility, with an opening drop to as low as $10.00 followed by a jagged run up to a high of $12.98, which then fell off throughout the remainder of the day to close at $9.00.
Since then, it seems the attraction of this stock has faded out – and has since fallen (along with the rest of the stock market), to close the week at $8.16
My guess is that we don’t see much demand in this one for a while, and with a weak stock market and shorts attacking everything: especially low-volume equities with waning demand, the bottom on this one has not yet been reached.

Smart for Life Inc (SMFL) continued the trend of poor debuts for random low-float IPOs bombing off the debut, although this one was especially bad. After pricing units at $10.00 (each unit consists of one share, and two warrants), this one opened trading at $3.25 and spent the first hour of trading basically taking a staircase down to a basement of $2.26 before gradually scratching its way back up to $2.76 before closing the day at $2.68.
Day 2 offered no salvation, as no Day 2 rally materialized, and at the close of Day 2 it had regressed to $1.84.
As if things couldn’t get any worse, Day 3, the selloff continued into the close of the week, and Friday’s close saw shares trade at just $1.34
I wasn’t following this one, and can’t see any reason why there would be much excitement for a nutritional/health/wellness brand, but with just 1.8M shares in the float, and warrant redemption up at $7 and $10 (two classes of warrants), it seems like this one is due for a low-float squeeze at some point – the question is whether it will fall much further before it gains the attention of any trading groups who could pump it.

Blue Water Vaccines (BWV) Looks like Boustead got back into their normal underwriter shenanigans as perhaps a makeup play for their customers who took a bath on HTCR (which has behaved unusually ‘normal’ for a Boustead-backed deal)… BWV priced at $9.00 and debuted at a lofty $50 and provided chaotic volatility from there on just 132k traded shares out of a free float of 2.22M shares. Hard to describe the movement on this one, asides from an opening dump down to a Day 1 low of $38.00 on less than 5k shares traded, with a halt-littered rally back up to $50.00, and spotty trading throughout the day (big spread and low volume). It peaked at $57.50 and again hit $57.36 – though the volume on those 1-minute candles was only in triple digits… it touched $60.00 in after-market trading (on 207 shares), but generally speaking, this was a very difficult stock to trade on Day 1,and given the evidently low number of shares being actively traded, nearly impossible to guess what this stock will do in the short term. Given what we’ve seen in similar setups in the recent past (AERC, OP, TKLF), I would venture to guess that within a week we see a seller step in and send this back to single digits: until then, things should be pretty volatile, and trying to play any dip in this could be either very lucrative or disastrous – it’s not something I’d wanna try to get involved in either way.

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I think the key takeaways from last week are that the low-float IPO theme has become a bit played out again – we see this trend repeat itself over-and-over: low float IPOs cool off and go dormant for a bit, then a hot one comes out and rips (this run started with HOUR). The next phase is for a few low-float IPOs to come out with mixed results, often with strong Day 2 rebound rallies (KSCP, MTEK, HTCR), and finally, over-saturation and too many traders jumping on the trade before any of the dynamics behind the runners can materialize. Essentially, the runners work because no one was expecting them to run and only a handful of pumpers were able to accumulate shares before promoting the stocks. When too many traders pile in early, the debuts get over-heated, the dips are less severe, and there are too many bag holders selling out of any runs.

It doesn’t help at all when the whole market crashes either. Having said all that, SMFL looks like one of the worst low-float IPOs I’ve ever seen, and while knowing nothing about the company, have to believe that at some point, the low float and severely depressed price point provide conditions for a boost once the market gets over the Russia-invasion threat.

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As for my personal safety and security situation, I appreciate the expressed concern from the IPOW community, and hope that all of the drama is overblown and that diplomatic remedies are swiftly implemented. It’s a different kind of ‘risk management’ than what we deal with as traders, but the same lessons apply. I feel I may have already held out hope for a peaceful resolution longer than is safe, but also question whether the decision to leave – and associated costs and risks – is logically founded or just a reaction to media hysteria. Ultimately, the downside risk of being caught up in a war zone drives me to take the difficult steps of temporarily relocating my family ( my pregnant wife, nearly two-year-old daughter, and two dogs) across national borders for the sake of avoiding a danger that may not manifest. Of course, it also means that I cannot justify actively trading beyond managing my account (yeah, gotta keep myself out of margin calls) – so while I am usually trading on my ideas, for the time being, I’m only able to share ideas and strategies from which I hope the IPOW can benefit (of course, this is all just informational – right?)

Anyway, good luck to everyone, and keep an eye out for this week’s IPO Preview – I’ll most likely send it out on Tuesday, given that Monday is a holiday, and I think we have a pretty thin week ahead.

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