Despite a solid rebound in the market, we saw all but one of the IPOs scheduled for last week get moved back to next week or thereafter. I tend to interpret this as a sign of underlying weakness in the market, particularly with regards to the mainstream IPO that was on deck for last Friday (IE). As for the low-float IPOs from second-tier underwriters, I think we may finally be reaching a point where retail traders are passing on the offerings after getting burned on a long string of these debuts that have failed to deliver any kind of upside. Asides from the ‘Stealth IPO’ setups, run-of-the-mill low-float IPOs have offered far more attractive entrance opportunities after the debut-dump than buying the IPO itself, even with warrants offered.
One fundamental change in the low-float debuts we’ve seen in the past few months compared to those from 2020/21, is that the ‘stories’ behind these stocks seems to have no impact on drumming up enough retail demand to deliver a debut “pop”. The last such setup that we saw was LITM back in November 2021 that jumped on a combination of low float plus lithium hype, and HOUR – which came to market with an ultra low float in early January after a long recess in the IPO calendar. The setups that seem to be working right now are the IPOs that are tied to Chinese investors/insiders, and buying the dips in ‘broken’ IPOs and hoping for a rally (PEV was a great example last week for a stock that sort of fit into both categories).
Going forward, I will be limiting my allocation requests on WeBull offerings to suspected Stealth Setups, such as GSUN last week: which delivered an immediate +375% return on IPO shares on the debut, and up to +640% if you timed the Day 2 run perfectly… albeit I was only allocated 15 shares. So again, no point in requesting thousands of dollars of allocation: if it’s a good one, you’ll only get a tiny fraction of what you asked for, and if it’s garbage, you’ll get a full bag.
Ok, Let’s take a look at what happened last week in IPO Land:
Golden Sun Education Group (GSUN) – June 22, 2022 | 4.4M Shares
IPO Price: $4.00
Debut Price: $19.00
Day 1 High: $19.74
Day 1 Low: $13.41
High Since Debut: $29.64
Low Since Debut: $13.41
Day 1 Action: That this one turned out to be a Stealth IPO was no surprise, the only question was at what price and which way would it move off the debut. As we typically see with these that open above the $17 threshold, it opened at $19.00 and failed to produce an immediate halt to the upside, instead, it wavered out of the gate with a touch of $19.74, before dropping down through two halts to a bottom of $13.41. But it quickly showed resilience: a move that imitated the debut drops of TOP and TNON, as it bounced back to 16.48 and proceeded to trade on choppy low volume with large spreads in a range between $14.15 on the low end and $16.82 on the high end for the remainder of the day. The Day 1 action can likely be summarized as retail allocations selling off at the debut, insiders and day traders stepping in to protect from a total collapse, with little meaningful activity for the remainder of the day.
Despite having taken a small position a bit too early just under the debut price, the resilience of the price action and low volume of just 500k shares trading on Day 1, gave me reasonable confidence that GSUN was likely to follow the path of TOP and TNON with upside moves on the near horizon. The question now was how long it would take and for how long might I have to be willing to bag hold my position before I could get out without taking a loss. My suspicion was that it wouldn’t be too long, and that I’d end up turning a profit.
My premonitions would be vindicated sooner than expected.
Day 2 Action: Day 2 began with optimism as trading in normal market hours opened at $18.55 – putting my position into green territory, and the price action held relatively even for the first hour and a half of trading: a low of $17.08 was reached without invoking any sell-off, and once lower support was established there, the stock began to mount a rally. Almost like clockwork, at 11:00 AM EST, a buying frenzy was incited, and by 11:03 GSUN was pumped into the first of two upward halts at $21.72. I decided that a win of $5/share (a +27% gain), was an acceptable win target, and exited my position with a single limit sell-order at $23.40, recognizing that I very likely was leaving considerable meat on the bone, but not wanting to get stuck any longer than I’d already been in this trade, knowing full-well that it was likely to reverse just as quickly as it had move to the upside. After flagging out of the halt in the $22.00 to $23.50 range for about 10 minutes, GSUN broke out again to halt at $25.44, opening essentially flat at $25.48 and quickly spiking up to a high of 29.64 before giving up steam and holding the $24 level until about Noon EST, when a failed breakout run just shy of $27 triggered a sell-off back down to $22.00 with further capitulation into the close to end Day 2 at $20.95.
Looking Ahead: Day 3 was more or less an off-day for GSUN, as just 161k shares were traded in a channel of $18.70 to $23.00 – essentially holding its range. It certainly appears to be setting up similarly to TOP and TNON, in which case we very likely could break through the $40 mark within the week. We’ve still only seen 1.4M shares trade hands in 3 days since the IPO, so until we get closer to the IPO float plus underwriter over-allotments, this one has a chance to keep pushing up. The danger is the virtually guaranteed near term rug-pull that likely sends the share price down below the IPO price (and realistically well below that). I will be watching for an opportunity to step into a small starter position early in the week at around the $17 level with a plan to double down if we see further downside to around $14. Stealth setups have been making delayed moves to their peaks, and with the current volume traded in GSUN, I believe we are not yet near the inevitable rug-pull event, but am not going to take what is, in all honestly, a high-risk gamble unless I catch a momentary liquidity event that provides reduced risk relative to the current price. If you decide to take a shot at this ticker, constantly remind yourself that the end-game on this kind of play is a sub-$2 stock, and the melody in this game of musical chairs will end abruptly and decisively. I’m equally ready to let this one pass on by, with plenty of targets in LPX plays and recent ‘broken IPOs’ that have aleady given up a substantial amount of risk to the point where the downside is minimal with massive potential for 100%+ to the upside… we’ll get to those next.
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A reminder before we move onto the LPX plays from last week:
I will be transitioning the IPO Newsletter to a paid membership starting on July 17, 2022. While I will continue to send out Free version with limited information, the real value of the research, analysis, and strategy ideas will be reserved for the Premium Membership community, which will be limited to 300 members.
Those who subscribe BEFORE July 17, 2022, will have an option to apply a coupon code to receive a substantial lifetime discount on their membership.
In addition to the premium newsletter content, Premium Members will be able to access a weekly live-conference video, live-streaming of select IPOs, and additional premium content that I expect to expand into the platform as a result of being able to financially justify further dedication of time, resources, and energy into this project as it evolves from a hobby into a source of income.
Click here for more details and registration.
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LPX mover Recap week of June 20-24, 2022
by Aly Angel: https://twitter.com/tradingfitgirl
Get her Guides! https://tradingfitgirl.net/trading-guides
Moving iMage Technologies (MITQ)
Catalyst: none
Type: OTC Uplist
IPO Date: 08-Jul-21
IPO Price: $3.00
LPX Date: 08-Jul-22 (multiple LPX)
LPX Period: 1-year (dir & ofc)
historical notes: 90-day 1.3m sh & 180-day 4.3m sh & 1yr dir/ ofc
Exercise Price: $1.88 & $3.00
Outstanding Shares: 10,828,378 (per 10Q)
Close day before vol: $1.05
High of the Day on vol: $1.74
Recap:
The EP’s are 1.88 and 3.00, and this ticker has been consistent pop to these prices into each LPX date. The 1-year LPX is for directors, officers and ‘All holders of Common Stock to be issued to prior holders of membership interests in MiT’ (ref 424B4 08-Jul-21 p. 25).
Looking Ahead:
From what we have seen in recent pops, a liquidity test with volume in pre-market and often into open will die out and the actual run will be a few days to a few weeks later. No way to know who is behind these, but def tickers to put on your list and watch for the consolidation and reversal after these vol pops.
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Phoenix Motor (PEV)
Catalyst: none
Type: OTC Uplist
IPO Date: 08-Jun-22
IPO Price: $7.50
LPX Date: 06-Sep-22 (90-day gen rule) & 05-Dec-22 (6-month)
LPX Period: none – 30-day over-allotment
historical notes: 90-day 1.3m sh & 180-day 4.3m sh & 1yr dir/ ofc
Exercise Price: $9.375
Outstanding Shares: 19,600,000 (per 424B4 09-Jun-22)
Close day before vol: $3.41
High of the Day on vol: $8.40
Recap:
This IPO opened below list price and was considered a ‘dud’. These have a statistical history of popping close to or over the List price w/ in the overallotment period (30 or 45 days, depending on terms).
Looking Ahead:
IPOs that fail out the gate are great to watch for the consolidation in the first week to month and then the reversal. The vol day is when you sell, as these usually gravitate back to lows, in a very short time. Def wait for the reversal after consolidation, as these can easily death drop before finding a bottom.
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Lucid Diagnostics Inc. (LUCD)
Catalyst: none
Type: IPO
IPO Date: 14-Oct-21
IPO Price: $14.00
LPX Date: 12-Apr-22
LPX Period: 6-month for 29.9m sh ref 424B4 14-Oct-21
Exercise Price: none
Outstanding Shares: 38,138,036
Closing Price Previous Week: $1.87
High of the Week: $2.95
Looking Ahead:
AH vol pop is usually an indicator of something to come, especially when there is no news to explain the volume.
Notes: PAVmed will hold approximately 75.5% of the common shares. The S-1 for initial registration is selling shareholders, and the company does not make any money from this registration (stated on page 1)
When there is a majority shareholder (+51%) we commonly see a ‘selling shareholder’s shelf registration’. This is considered non-dilutive as it is not adding new shares to the o/s or float.
Regarding the lack of EP for this ticker, I will typically only play the technical, as we do not have a price target for a long-term position.
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