Following an intense two weeks of IPOs to close out Q2, along with a few anticipated cancellations of Chinese IPOs following the Didi Debacle, we were left with just a rather light calendar last week… but there were still incredible win opportunities:
Quick Heads up: Catch me on Benzina Pre-Market Prep on Monday at 4:00 AM EST to preview the week’s upcoming IPOs:
Atour Lifestyle Holdings (ATAT) got pulled with no re-schedule date set yet. Looks like Chinese IPOs will be on freeze until there’s more clarify from the PRC on what they will require for customer data security.
Moving Image Technologies (MITQ) lived up to the hype that was expected out of a low-float IPO with ties to meme-stock AMC. Unfortunately, as an AMEX listing, many (including myself) were left in the dark as to the pre-debut indication price and missed the entry at an opening price of $12.00. MITQ jumped up through 4 halts to a peak of $27.00 before quickly dropping back down to around $20.00. A choppy fade out through the afternoon session offered gamblers to stake positions in the $13-15 range in hopes on a Power Hour run, which materialized just after 3:00 PM EST with a pair of double-tops at $25 at the 3:30 PM mark and several minutes before the closing bell. A Day 2 rally failed to materialize (as foretasted in the newsletter update I sent out on Wednesday), and by the end of the day, momentum had left this play.
LinkDoc Technology (LDOC) another Chinese tech stock that decided this wasn’t an idea climate for US based IPOs… it might be a while before we see any Chinese companies go public who aren’t pulling some kind of money laundering scheme through the stock market go public in the States.
Transcode Therapeutics (RNAZ) finally pulled the trigger on its IPO after several postponements and upsizing it’s share allocation to 6.25M shares from what had initially been a super-low 2.77M share float. The buzz around low-float IPOs might have served this debut a bit better with a lower share count, but it seems that Roth Capital, relatively unloved in the investment community, wisely took advantage of the opportunity to raise additional funds for their client, much to the chagrin on those who bought on the debut at $6.00.
RNAZ briefly dipped, then jumped into a predictable single halt at $6.60, and then offered a brief moment for profit taking on a jump to $7 from the halt, but the party was broken up quickly. The stock halted a minute after that on the way down, and again halted in the wrong direction immediately thereafter, to bottom at $4.83. There would be no further relief for bagholders, despite a break of VWAP roughly an hour after the debut, but it could not break $5.91, as bag holders who bought the debut scrambled to free up their position with minimal loss. After spending the remainder of the day middling between $5.00 and $5.40, RNAZ closed at $5.29. I don’t like biotech in general, unless we’ve got a great story and a super-low float. And you really don’t want to be stuck in these beyond Day 1, as you can count on trading being paper thin for a long time until they get some kind of FDA advancement… likely years.
Sentage Holdings (SNTG) was on Stealth Watch, as it was a Network 1 Financial underwritten IPO, and as expected, it delivered a highly abnormal debut. Unfortunately, the IPO, which was priced at $5, debuted at an insane $42.99 – which made it an unwise venture to play off the debut. Though it ran upwards into a halt at $47.29 and continued up to $52 thereafter, those who did play the debut would be quickly punished for not taking immediate profits, as it spent the next 5 minutes of live session trading (through a pair of halts) to hit a bottom of $33.12. Somewhat surprisingly, it rebounded back up to the $45 range, before giving up rather quickly and fading out through the remainder of the day to close at $31.25.
To sum this one up: this smells like a money laundering scheme where money is being moved out of China into the West. The scheme works like this:
Company owner “Trader A” has $160M cash in China that he wants to move out of the country, so he sells 4M IPO shares to his cousin “Trader B” in New York.
Trader B, then sells those 4M shares back to Trader A at $40/share in the pre-debut pairing process. No one else wants to buy them at that price, since it’s an insanely ridiculous price to pay for this random Chinese company.
After that, any additional shares they can offload to algos and suckers trying to jump in on the fun is just pure profit, and Trader A has already accomplished his goal of transferring his money out of China to a Western bank account.
Should this be legal? I dunno, but when they pull this scam at a lower debut price, it allows us to make some sweet instant gains on the post-debut halts. TIRX debuted at like $17, halted at $18.70 and then opened at $49.99 – I made $33 per share on 1,000 shares. So I’m willing to watch these and will jump in when the debut price isn’t 900-1000% above the IPO price.
Anyway, it’s an interesting phenomenon to watch and hypothesize over.
Stay tuned for more Stealth alerts to come…
I’ll be going over next week’s IPOs tomorrow (Monday, July 12,2021 at 9:00 AM EST) on Benzinga Pre-Market Prep:
Hope to see you all there.
NOTE: This is not financial advice, I am not a financial advisor. This is just information for you to use as you deem fit. Good luck out there.