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IPO Trading Review for the Week of March 21, 2022 – March 25, 2022

March 27, 2022

IPO Trading Review for the Week of March 21, 2022 – March 25, 2022

The market has continued to rally, and recent IPOs are rebounding along with it. If the trend continues, we’ll hopefully get some mainstream IPOs on the calendar soon. When we do see a lull in IPO activity, the first ones to come out of the gate are often priced rather conservatively compared to those that debut in markets that are already hot. As we saw with GFS and CRDO, these have been great plays to hold for a week or more for extended gains.

Meanwhile, low-float IPOs have been the only game in town for IPOs, and we’ll have to see what Monday morning brings for the two debuts we had last Friday, but it does appear that there has been greater interest on Day 1 in both of these deals, and if we do get a Day 2 run in one or both of them, I expect the debut trade to come back into play on one of the next upcoming low-floaters: provided the market continues to rally.

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Before we jump into the recaps: most of a you are probably aware of the fact that I’ve recently had to evacuate my family (pregnant wife, 2 year old daugher, and 2 dogs) from Kyiv, Ukraine – where we had been living for the past 3 years. A few members of the IPOW community have asked me if they could make a donation or contribution to help out. While I’m doing alright and have savings in my trading account, I try not to touch that money, and this whole episode has been a pretty significant financial hit.

For anyone who would like offer some personal support, I’ve gone ahead and setup a GoFundMe account –

https://gofund.me/400de027

I would also like to encourage those who want to help those in greater need than my own to donate directly to a refugee fund.

Dyakuyu.

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

Locafy (LCFY) – March 25, 2022 | 1.97M Shares
IPO Price: $4.00
Debut Price: $3.34
Day 1 High: $3.64 (after hours)
Day 1 Low: $2.24
High Since Debut: $3.64
Low Since Debut: $2.24

Day 1 Action: This one clearly telegraphed a drop off the debut, and fell quickly from the open at $3.34 to an initial base at $2.80 before climbing back up to $3.24 on light volume and large spreads. For a while, it looked like it would follow the usual playbook for recent low-float IPOs, and fade out for the remainder of Day 1 as shares were accumulated by pumpers in anticipation of a Day 2 run. But after failing to stage a significant breakout above $3.00 within the first hour of trading, a large sell order knifed the price down to $2.71, and panic sellers began heading for the exits. Watching the Level 2 orders, we could see accumulators pull their bid prices down to the $2.40 and $2.50 levels, but appeared to be disciplined in allowing sellers to come to them, rather than begin to outbid each other in raising the price. Volume remained thin until right before 2:00 PM EST, when some large orders came in and the stock spiked up into its first halt at $2.90, with an open at $3.00. Traders took this opportunity to dump their positions, and the stock again dropped – bottoming at $2.56 before accumulators stepped in to stabilize the price at the $2.56-$2.65 level.
From there, buyers started steadily outbidding each other, which culminated in an end-of-day run that spiked into a halt at $3.34 with just 8 minutes left in market trading. After-hours saw the stock open at $3.36 and make a gradual run up to as high as $3.64, as day traders and social media accounts began calling out the stock as a play for Monday.

Day 2 Action: We’ll see on Monday

Looking Ahead: This is poised to be pretty volatile on Monday, but it seems that many day traders were already on it by the final hour of trading on Monday. I think this has some pretty solid upside potential until it pops. I expect a spike in early pre-market on Monday, and very likely second spike on the open. But given how many traders already piled in at the end of the day on Day 1, it may be a case where the trade already got played out. We typically see 2 spikes on these, but after the early pre-market spike, it’s a bit tricky to pick off the bottom of the pullback before the second spike. Too early, and you could be stuck bag holding, too late, and you could miss it. I’ll be looking to see if we get down to about $2.60 in pre-market after the initial spike. If it doesn’t come, then ok. This will be an interesting one to watch on Monday, and any entry under $3 has somewhat limited downside potential, with QPX and LPX off in the not-so-distant-future to bail out bag holders who get stuck.

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AN2 Therapeutics (ANTX) – March 25, 2022 | 4M Shares
IPO Price: $15.00
Debut Price: $16.85
Day 1 High: $17.80
Day 1 Low: $15.00
High Since Debut: $17.80
Low Since Debut: $15.00

Day 1 Action: I don’t like to trade biotech IPOs, and certainly not on the debut. This one dropped out of the gate from $16.85 to $16.25, but then quickly reversed into a short lived run up to $17.80. If you bought the dip, and set a trailing stop loss, you may have been able to turn a quick $1 profit, but if you weren’t able to get out in time, you ended up getting stuck in what would turn out to be fading volume that bottomed out at $15.50 before reversing back up as high as $17.00 before fading out to close the day at $15.40 after touching as low as $15.00 even right before the closing bell.

Day 2 Action: We’ll see on Monday

Looking Ahead: While this is a very low float IPO, with just 4M shares, and we did see relatively low volume with a dip into the close, the price up at $15.00 simply leaves too much downside risk and is not the kind of setup that typically appealing to day traders and trading groups responsible for running most of the low float IPOs on Day 2. More often than not, biotech IPOs fall for several days off the IPO, and do not run again until they reach some kind of FDA announcement. My guess is that this one falls below $10 before any kind of substantial news gets announced, which could be months or even years off in the future. While certainly possible that it could be pumped with such a low float, the high price point makes it a less appealing and more expensive target than the $2-3 variety. I’ll have this on my watch list by default, but am not going to take any risk on playing a hopeful Day 2 run on this one. There are other interesting low-float IPOs coming up this week so don’t wanna get stuck bag holding a biotech (again).

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