The war in Ukraine, inflation, and general aversion to risk in the marketplace has put IPOs on hold for the past month. But as we’ve said in the past: when there’s a lull in the IPO calendar, those that first test the waters in tumultuous conditions, are often primed for upside.
We see this in both mainstream IPOs and the more under-the-radar low-float variety: when the market is cold, IPOs that are willing to weather these conditions often provide lucrative trading opportunities. For mainstream companies, this is usually due to the fact that any company that is solid enough to debut in a cold market is confident that they will still be able to garner support from institutional money (as we saw with CRDO earlier this year). For low-float, lesser-known companies, we often see runs in this kind of setup when there haven’t been any IPOs for a while: the low-float IPO theme gets played out pretty quickly when the calendar is stuffed with them, but once it thins out, the first one out the gate often gets picked up on after it starts trading (rather in the pre-debut pricing). This results in an opportunity to get in before the run up, or predicable Day 2 spike (we saw HOUR do this on it’s debut after a prolonged dearth of IPOs at the start of the year).
This past week, we saw this trend continue.
Catch me live at 12:00 PM EST (noon) on Benzinga Live to review last week’s winning IPO trade and preview the IPO Calendar for the week ahead:
Ok, Let’s take a look at what happened last week in IPO Land:
The Marigold Companies (MGLD) – March 10, 2022 | 1.65M Shares
IPO Price: $2.00
Debut Price: $2.44
Day 1 High: $2.44
Day 1 Low: $2.00
High Since Debut: $8.87
Low Since Debut: $2.00
Potential Win Opportunity: 260% based on buying the debut price and holding through Day 1 and selling at the early pre-market high.
Strategically Feasible Win Opportunity: 225% based on accumulating at roughly $2.15 on Day 1, and selling out with a stop-loss or limit order on the Day 2 opening run during regular trading hours at $7.00
Day 1 Action: This was an uplisting that added 1.65M shares to a low float of roughly 4M shares, and it seems that not many shares were freed up for sale on Day 1, and no one really was all that interested in buying shares either, given the bloodbath that was occurring across the market. The stock priced at $2.00, but managed to entice 12k shares to trade at $2.44 on the debut, but after the opening 10 minutes of flipping between $2.20 and $2.35, volume fell off and there simply wasn’t all that much volatility: with shares trading between $2.10 and $2.18 for most of the remainder of the day. Day 1 saw only 234k shares trade.
Day 2 Action: This is when things got interesting, with an early pre-market spike up to $8.87 that backed off to just above the $4 level by 6:00 AM EST… another jump back up to $7.50 after 7:00 AM EST brought a fresh wave of traders to the table, and put this one on the top of many scanners as the mover of the day. Before the opening bell had even rung, nearly 1.4M shares had bee traded and the stock had fallen again down to the $3.80 level. Once the market opened, MGLD went on a revived run, peaking at $7.11 before flagging and dropping back down to $4.80, but it was quickly back above $6.40, and held in the $5.50-$6.00 range until the afternoon, when volume started to dissipate into the afternoon, with no end of day rally to bail out the doubtless numerous bag holders. It closed the week at $4.11 and I would expect next week to see this drop back down to its IPO pricing levels.
Looking Ahead: It seems like the float on this one was constrained on the debut, and began selling into the rip on Day 2. With 5.58M shares now trading, this isn’t an ultra-low float setup anymore, and I think day traders will have moved onto another target by next week. It could still have a spike in it at some point, but it seems more likely to retreat a bit more from the current price and come back down to IPO pricing or lower before we get any further action on this one. Maybe keep an eye on it going into QPX, but otherwise it’s probably better to focus on upcoming IPOs and those entering QPX.
And yes, I believe I’m back to a situation where I can regularly send out the newsletter: these past couple weeks have been crazy, and I finally got my dogs out of Ukraine. It was a memorable and somewhat challenging adventure to bring them from Budapest, to Munich, to Paris by train, and ultimately then fly them down to Faro, Portugal from Paris by plane. I appreciate all the help and support from friends, friends of friends, and random strangers along the way.