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IPO Trading Review for the Week of May 2, 2022 – May 6, 2022

May 8th, 2022

The market got wrecked all week, culminating its worst day for as long as many traders can imagine: but you wouldn’t know it from how IPO debuts performed this week. Ok, so a bunch of them rescheduled due to market conditions (or in one case, a question from the SEC), but those that did debut continued to show strong upside for debut plays… even the first brand-name mainstream IPO we’ve seen this year.

We’ve seen a string of low float / off-brand IPOs run in the past few weeks: going back to GNS, JCSE, OST, HLVX, and now AUST While most of these owe their runs to withheld volume on the debut, at least one of them appears to have run simply on retail enthusiasm around this setup. I expect that we may see this trend continue for the next low-floater to debut, until we reach a point where the debut premium gets over-inflated by high demand, and the opening price proves too tempting for allocation holders to hold. This will produce a front-loaded opening trade with no follow-through buyers to produce the pump. One or two of those should cool off the trade for a while: at that point, we can look for Day 2 rallies to re-emerge until the cycle of opening debut pops resumes.

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

Failed to Launch:

  • Actelis (ASNS) – Moved to May 10, 2022

  • SOS Hydration (SOSH) – Moved to May 10, 2022

  • Novusterra (NOVS) – Pulled, no further information

  • Wytec (WYTC) – Pulled, no further information

  • SaverOne (SVRE) – Moved to May 11, 2022

Last Week’s Debuts:

Austin Gold (AUST) – May 4, 2022 | 3M Shares
IPO Price: $3.00
Debut Price: $6.50
Day 1 High: $29.00
Day 1 Low: $4.15
High Since Debut: $29.00
Low Since Debut: $.88

Day 1 Action: This extreme runner caught everyone by surprise: though if you had insight into the pre-debut imbalance on AMEX (which I have not yet figured out how to view), the ultra-low volume and high debut premium would have been an obvious tip-off to the run that ensured the opening trade. With just under 35k shares exchanged on the opening print at $6.50 the halt up to $7.15 was immediate, and after over an hour of haltage time, it then opened at $12.04 and immediately halted again at $13.20. The halts weren’t done yet, and several more would culminate in a peak at $29.00 before it leveled out in the $27.00 to $29.00 range before a fire sale brought the stock crashing down nearly as fast as it had ascended. There would be no meaningful reversal on the bleed out into the close. At the end of Day 1, a stock that had priced at $3.00, opened at $6.50 and run to a high of $29.00 would close the day at just $4.35.

Day 2 Action: After a monstrous run on Day 1 followed by an extreme sell-off, Day 2 was setup for accumulators to run the price again in pre-market and we saw a 4:00 AM rally peak at $6.15 with an secondary push up as high as $5.80 following the opening bell. But that was as much of Day 2 rally as AUST could muster, and the share price quickly returned to the mid-$3s for most of the day. A weak rally around 2:00 PM EST couldn’t get past $4.20, and the share price closed at $3.72

Looking Ahead: This one as been played out, but is still a low-float IPO that can fly on any sort of PR catalyst. I’d watch this one to drop below $2.00 before starting to accumulate any kind of position, and likely won’t bite unless I see it drop significantly below that before its LPX. At $1.30 or below prior to LPX, it’s likely to be a relatively safe bet: at some point they’ll announce a permit to dig, contract of some sort, or in the dream scenario for bag holders and swing traders alike: that they’ve struck gold.

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Edible Garden (EDBL) – May 5, 2022 | 2.93M Units
IPO Price: $5.00
Debut Price: $3.00
Day 1 High: $3.00
Day 1 Low: $2.46
High Since Debut: $3.00
Low Since Debut: $2.40

Day 1 Action: After increasing the share offering from 2.14M units to 2.93M units, and pricing below range at $5.00, this one may have looked interesting to day traders who had picked up on the recent trend of ripping low-float IPO debuts. Experienced low-float debut traders would have seen the writing on the wall, with a heavy sell-side imbalance in the pre-debut pricing, and volume up at 296k shares lined up for the opening print. The stock proceeded to drop all the way down to $2.46 before climbing back up to $3.00 and traded in this range for the remainder of the day, closing at $2.89. While not a particularly damaging play for anyone who got duped into buying the debut, and easily mitigated if followed up with buys down at $2.50 – $2.60 to bring your average down, this was not a debut where I saw any clear entry points. The opening dip was simply not low enough to interest me in a play: I had my target at $2.15, and the end of the day did not produce a significant sell-off.

Day 2 Action: Day 2 did not deliver any early pre-market spike, and based on the Day 1 pattern, none should have been expected, since traders kept jumping on any dips and selling off any moves approaching the Day 1 opening price. It actually sold off into the open, hitting a low of $2.40 about 10 minutes before market open, which then setup a run back up to just over $2.80 before volume began to wane.. still, the price held $2.55 for the rest of the day, and it walked its way back up to a close at $2.83 on Day 2. Some interesting after-market trades including 5,000 shares bought up in the $2.95 – $3.00 range could indicate a further action on Day 3.

Looking Ahead: We haven’t seen this one make any kind of serious move yet, while holding its trading range pretty tightly in the $2.50 – $3.00 range, which indicates that some traders may be accumulating a position with the intention of pumping it in the near future. Day 3 is Monday, so keep an eye on this one… Remember that the IPO price was $5.00, so insiders – including the underwriter – would love to see this run up to $5.50 in the near future: It won’t surprise me at all if we see a pump into this range at some point this week.

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Bau(PEPG) – May 6, 2022 | 7.2M Shares
IPO Price: $12.00
Debut Price: $15.60
Day 1 High: $15.60
Day 1 Low: $11.50
High Since Debut: $15.60
Low Since Debut: $11.50

Day 1 Action: I don’t call these “Biotech Busts” for nothing: and this one lived up to its designation as one: debuting at $15.60 after pricing at $12.00 and immediately selling off in the opening minutes down through a halt to a bottom at $11.50. Brave traders who attempted to catch a reversal off the IPO price at and below $12.00 were rewarded with a bounce back up to VWAP at $13.27, and an eventual carry-through that touched $13.88. It then base-lined around the $13.00 range for the rest of the day.

Day 2 Action: I’m not a big fan of biotech stock IPOs in general, as they are difficult to predict and don’t really follow the same trends as ultra-low float IPOs when the float is above 5M shares. It’s still trading above the IPO price, but in the $13.00 range and over 7M shares in the float, I doubt this gets much attention from day traders, and I have no clue as to where to value this in terms of how institutions might see this: short of saying that above $12.00, it’s not a value buy based on where they priced the IPO.

Looking Ahead: Not the kind of stock I’d trade. Maybe if it gets obscenely low: like $2.30 or below before LPX. Otherwise, it’s not something I can predict and if I had to make a guess one way or another, I’d put my money on it going down from here long before it proves any value to legitimize a move to the upside.

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Bausch + Lomb (BLCO) – May 6, 2022 | 35M Shares
IPO Price: $18.00
Debut Price: $18.51
Day 1 High: $20.17
Day 1 Low: $18.40
High Since Debut: $20.17
Low Since Debut: $18.40

Day 1 Action: As the first brand-name mainstream IPO of the year, there was a lot of pressure on the underwriters to price and debut this stock to minimize upside: given market conditions on Friday, that meant pricing it at just $18.00 – well below the stated range of $21.00 – $24.00. The lead underwriter on this deal: Morgan Stanley, has a generally positive reputation for leaving some room on the table for retail traders to get in on the debut: and the relatively conservative opening print at just $18.51 on a volume of 2.69M shares gave this stock some room to run, with an opening climb that reached $19.34 before profit taking saw it fall slightly down to $18.75 before rebounding back to $19.35 and base-lining around $19.00 into the afternoon. The final 2 hours of Day 1 saw this one rally up into the high $19’s and a final push in the closing minutes saw it breach $20.00 at a high of $20.17. The total volume for Day 1 reached 15M shares.

Day 2 Action: We’ll see what Monday brings to the general market, but if the market can’t shake off the downward trend, this may begin to follow suit with little demand to support any selling pressure. On the otherhand, at any price below $20, it appears to be slightly undervalued, at least based on the IPO prospectus valuations, and we should expect some support at the $18.00 IPO price. So any dips below that could be opportunities to scalp quick turnarounds.

Looking Ahead: I’ll keep an eye on this one for any dips below $18: particularly if we see anything touching significantly below that, for a scalp on a reversal. The underwriter is likely to protect the downside at some level, and given the initial price range at $21-24 and IPO price at just $18, I think this can come back up to the $22-23 range if the market rebounds at all.

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