The market came back strong this week, and we saw the leading contender make a jolted but predictably triumphant debut, while the lesser-known characters gave uninspiring performances.
For this week, I’ll be switching to a later air time on Benzinga Pro for the Monday IPO Preview show: catch me at 12:30 PM EST for the upcoming IPOs for next week:
Ok, let’s go over last week’s IPO trades:
Healthcare Triangle (HCTI) didn’t look too strong for IPO holders who bought in at $4.00, but with a debut price way down at $3.17 on this low-floater, it didn’t take much to provide a win opportunity for traders who got in on the open and rode it to the break of $4.00: even better for those who let it run a little further to a peak of $4.34. There was a spike in the early pre-market trading on Day 2 to $4.80, but holding through the initial Day 1 run was a risky maneuver, and if you held any longer than that, you missed the most obvious profit opportunities.
AvidXchange Holdings (AVDX) was relatively uneventful, as it debuted at $24.14 and dropped off the opening to a bottom of $23.35 before embarking on a run up to $25.00 for a decent reversal play if you managed to time it perfectly. It was pretty choppy for the rest of the day, but after a dip down to $23.85 it steadily climbed its way back to a peak of $25.20 one minute after the closing Bell on Day 1. Not a punishing play for anyone who played it and took the exits offered on Day 1 or early Day 2, but unfriendly if you held much longer than that.
Lucid Diagnostics (LUCD) simply punished anyone who touched this one, and another good example of why I don’t (or try not to) play biotech IPOs. Debuted at $12.75 and dropped as low as $10.36 before recovering slightly to close at $12.20.. Day 2 was a further dumpster fire, as it closed at $9.55
No good way to manage this trade: you can try to buy the bottom and ride the close, but the risk isn’t worth the downside, and after the IPO, it’s really hard to exit these trades once volume disappears. Better to just avoid biotech altogether.
IHS Holdings (IHS) after debuting at $17.70 – way below the IPO price of $21.00, this one looked like the kind of play that would offer an easy run back up to at least $19+… but nothing is easy in trading lesser-known IPOs, and after a brief run off the open to a high of $18.48, the market lost interest in this play, and it was a steep drop to a bottom of $16.90 before a short lived recovery back to $17.62 – not enough mercy for debut buyers who didn’t get out. I ended up sitting out of all the IPOs this week: didn’t have free spending power to make it worth the risk as I saw it, but I did attempt an entry on this one with a limit order set at $17.55 that missed by $0.10… had I gotten in, I’d have set a stop loss at $17.97 once it broke through $18, and at least guarded against a downside swing. As we’ll see in our next example, this kind of strategy can help keep you from pain, but will also work against you sometimes…
Gitlab (GTLB) was the main event of the week, and the hype combined with a low float of just 10M shares was worthy of IPO Warrior’s attention. But when the IPO priced at $77 after an initial price range of $55-60, things felt a bit too hot for comfort, and when the debut indication price started climbing into the $93-95 range, I had to take a pass. First of all, my spending power was limited: large swing trades I’d made in the previous weeks were finally turning positive, and in order to play this I would have had to edge dangerously close to the limits of margin in my account. At a hefty premium I couldn’t take the risk, and I wouldn’t have been able to take a sizeable position anyway.
The way I saw it, at a debut of $95, the upside target would be $100, and the downside potential was as low as $80. Risk reward analysis, coupled with zero-tolerance for error in my portfolio at the time of the debut, necessitated watching from the sidelines.
Had I traded this, the debut price of $94.25 would have had me on edge for any downward movement, and so when the stock climbed up to $96.50 in the second minute of trading, the prudent move would have been to set a stop loss at $95, raised it to $95.50 or $96.00, which would have resulted in an exit when the stock reversed down to a bottom of $93.48.
It then made an identical run back up to $96.50 before again dropping to down to a low of $93.11, before leveling off down at $93.50… things were looking bleak there for the opening hour, and paper handed traders would have been quick to take profits when it then rallied back through the debut price to a peak at $97.00… so if you weren’t highly confident in this trade, you would have already faced several ‘smart’ exit points. From the interim top at $97, it then faded out back down to $94.10 – again, if you held past this you were either convinced it would ultimately run, or just taking unnecessary risks, but hard to fault winners, as it was all uphill from there, as GTLB ripped upwards for the remaining two hours of trading to a peak of $105.98 … blowing through the $100 target wall with little effort, and closing the day at $103.89
Day 2 was even more chaotic, after a pre-market session high of $107.50 looked like it would mark the ultimate high for this stock, it dipped out of the opening gate and slowly tortured loyal holders through a steady decline that bottomed out at $93.50. But again, this appeared to be a magic trampoline, and GTLB bounced off the bottom on a similar run as Day 1, this time to a peak of $116 a few minutes after the closing bell of Day 2.
If you played this all the way through, you nailed a 20% win… but the conviction required to hold this through the end of Day 2 was not in my game plan, so I don’t mind missing it. It does bode well for future debuts in the growth/tech/low float sector however, and it is encouraging for the IPO market going forward.
Paragon 28 (FNA) was nothing exciting, and when an lesser-known IPO debuts with no marketing, no hype, and debuts 10-20% above IPO, it’s generally better to let these go. Debuted at $19.37, dropped hard to $17.74, reviered to $18.95, and then choppiness into a drop off at the close. I’m pretty much in the mindset of avoiding IPOs where I don’t have high conviction at this point, so no reason to engage with this one.
MiNK Therapeutics (INKT) showed up late on the calendar, and like most biotechs, even with a 3.3M share float, was not worth trying to play. Debuted at $12.04, dropped as low as $11.20 and traded lightly throughout the dayin the $11.60 to $12.00 range. Low float is a great attribute, but with no promotion, on a biotech stock the chance that it runs is far lower than the chance that it tanks.
Please join me on Monday at 12:30 PM EST on Benzina Pro to review the winners from last week’s IPO trades, and preview the IPO plays for the week ahead.
NOTE: this is not financial advice, and I am not a financial advisor: this information is just my opinion and is for informational purposes only. Trading equities is risky. Do your own research,and trade your own trade.