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IPO Trading Review for the Week of
May 9, 2022 – May 13, 2022

May 13, 2022

In a week that started with panic-stricken sell-offs on Monday that carried into Tuesday, the outlook for pending IPOs appeared bleak. But by Friday’s turnaround, we saw conditions ripe for a mainstream IPO to offer a relatively easy debut trade setup, and a low-floater from one of or favorite lower-tier underwriters failed to perform as hoped (which was clear in the pre-debut imbalance).

Another concept that was re-enforced with the low-float IPO offering, which are commonly available on WeBull for pre-order, is that the IPO trading strategy I generally employ is NOT reliant on getting any shares allocated at the IPO price, and there’s a reason for this: mainly, that when I do get a full allocation, then it’s a bad sign for the opening. When I only get a small allocation of what I requested, that’s generally a good sign for demand. So the takeaway on this is not to request a large allocation regardless of what I think about the setup: and instead, read the pre-debut indication setup to determine my trading strategy.

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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:

https://www.youtube.com/watch?v=ku9m-LA5JJw

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

Hanover Bancorp (HNVR) – May 11, 2022 | 1.36M Shares
IPO Price: $21.00
Debut Price: $21.44
Day 1 High: $22.00
Day 1 Low: $20.11
High Since Debut: $24.68
Low Since Debut: $20.11

Day 1 Action: On a day when the market was on its knees, HNVR bravely debuted and managed to open at $21.44 – slightly above the IPO price of $21.00, but after a quick pop to touch $22.00, it proceeded to slide down to a bottom of $20.28 in the opening minutes of trading: rather unusual volatility for a bancorp IPO, but given the ultra-low float, perhaps somewhat expected. It quickly rebounded back up to $21.98, and from there, it acted more like a typical bancorp IPO, trading in a relatively tight range of $21.00 to $21.40 until an unusual small print at the close dropped it to $20.11 on just 2.7k shares, so nothing too remarkable there.

Day 2 Action: Day 2 started out in a typical baseline at $21.20 but then abruptly triggered an uncharacteristic rally right after Noon EST, that shot the share price up as high as $24.68, but after a few minutes of choppy trading, it returned to trading in a tight zone of $21.20 to $21.70 for the remainder of the day.

Looking Ahead: This appears to have stabilized in the $21.00 to $22.00 range, as we would expect from a bancorp stock, with the float having risen to 6.5M shares. I don’t expect much volatility from here: at least, not anything predictable, and I generally don’t trade bancorp IPOs to begin with

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Actelis Networks (ASNS) – May 13, 2022 | 3.75M Shares
IPO Price: $4.00
Debut Price: $3.90
Day 1 High: $3.94
Day 1 Low: $2.60
High Since Debut: $3.90
Low Since Debut: $2.60

Day 1 Action: Full allocation requests on WeBull are rarely, if ever, a good sign for an IPO debut, and this was no exception. The pre-debut indication dropped to as low as $3.11 at a volume of roughly 350k shares, before a buyer jumped in for roughly 300k shares at $3.90 to pull the debut price out of the basement. Savvy allocation recipients dumped on the debut, sending the share price falling into a halt at $3.19 that opened lower at $2.79, and bottomed at $2.68 before reversing into a minor recovery run back up to $3.29. But the reversal was short lived, and it again returned to the $2.60 level before climbing back to $2.90 and after baselining around $2.80, fell again down to $2.60. It seems to have found some support at $2.60, as it returned above $2.80 before falling off into the close at $2.40

Day 2 Action: Day 2 is Monday, so we’ll have to wait for the weekend to see what comes.

Looking Ahead: Low float debuts that fall and fail to run on Day 1, often get accumulated and run on Day 2 or Day 3 by trading groups and algorithms. So at this point, the setup would be to wait for dips below $2.60 and build a position from there until we see a spike. These runs have varied momentum: but keep the $4.00 IPO price in mind as bag holders will look to dump anywhere near that level.

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ProFrac Holding Corp (PFHC) – May 13, 2022 | 16M Shares
IPO Price: $18.00
Debut Price: $17.60
Day 1 High: $18.90
Day 1 Low: $17.60
High Since Debut: $18.90
Low Since Debut: $17.60

Day 1 Action: After pricing the IPO at $18.00 – well below the anticipated range of $21.00 – $24.00, the weak pre-debut indication price that dropped to as low as $17.15 presented an relatively safe entry even as it climbed back up to $17.60 for the opening print. While such a setup for low-float IPOs from more dubious underwriters would indicate further downside, when have a mainstream offering underwritten by top-tier underwriters going live in rough market conditions, we typically see IPO pricing and debut pricing set at levels that are generally ‘kind’ to both institutional and retain traders. So when we see a debut that is more than 15% below the initial price range, we often see an easy upside move off the opening trade. We saw a similar setup with BLCO last week, which also set its range at $21-24, priced at $18, opened in the mid-$18s and ran to just over $20 on Day 1.
PFHC opened at $17.60 and moved steadily up to a high of $18.90, falling back to support around $18.40 before running into the end-of-day to touch a high of $19.45.

Day 2 Action: Day 2 is Monday, so we’ll have to wait for the weekend to see what comes.

Looking Ahead: Hard to tell what Monday will bring, but I expect support to remain at $17.60, and any dip significantly below that to rebound accordingly. If oil continues to rise, then Day 2 could bring more upside to this, bearing in mind that the original price range was as high as $24.00. If we happen to be on the doorstep of a rebound rally, then this one could move substantially higher from here, and has a relatively low float to boot.

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