Despite unfavorable market conditions, we saw a few IPOs get pushed through last week, including one mainstream debut that unfortunately, more likely sent a warning sign to other companies that are considering going public over the next few weeks.

We also saw that while the debut trade may not be the best approach to low-float IPOs, there are still some tremendous opportunities to bank profits on well-timed runs off of baseline plays. I have not mustered the conviction to play these, but did point out a likely run that went parabolic on Day 2, and will continue to point out potential runners going forward.

+++

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=MgeAV3AiX2E

+++

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

FGI Industries (FGI) – January 25, 2022 | 2.5M Units (1 share + 1 warrant)
IPO Price: $6.00
Debut Price: $5.00
Day 1 High: $5.53
Day 1 Low: $3.75
Dey 1 High after Low: $4.26
High Since Debut: $5.53
Low Since Debut: $2.94

Day 1 Action: This one played out as predicted, with a drop off the debut at $5.00 into a halt down at $4.53, which then rallied into an open at $4.85 that peaked at $5.53 and fell off from there. Too unpredictable, and generally unattractive to day traders when there’s warrants involved. It found a bottom at $3.75 and made a weak rally up to as high as $4.26 before trailing off into the close: the market was basically on its knees with no interest in piling into a no-name IPO. The only hope for this one was that it was a Stealth IPO, which didn’t appear to be the case given the warrants.

Day 2 Action and Beyond: , This one basically moved with the rest of the market midweek (downward) and hit bottom at just below $3 right before Friday’s open. And along with the rest of the market, it made a strong reversal from there, with a run back into the the mid $3s followed by what appears to have been a sympathy run off the KSCP takeoff into an after-hours run up to as high as $4.48 on Friday after the closing bell.

Looking Ahead: Day traders are prone to key in on recent low-float IPOs at any moment, though the ideal play is to pick these off before they make any kind of upward run. Down under $3 is where I like to pick up $4-6 IPOs, as the downside is far more limited. At $4-5 this could still get pumped, but with Chinese companies, if they aren’t clear Stealth/Scam plays, I tend to think the market will ultimately shun them. Then again, 2.5M shares plus 2.5M warrants is still low enough of a float to attract pump-and-dump groups. If you picked up shares in the $3.00-$3.50 range on Friday, or you’re bag holding from earlier in the week, maybe hold for further action, but I’m not sure that buying and waiting for this one to run at an entry above $4.00 makes much sense. If it does drop again, it could still get pumped. Until it gets run over the IPO price, the potential for a pump is still in the cards.

+++

Credo Technology (CRDO) – January 27, 2022 | 25M Shares
IPO Price: $10.00
Debut Price: $12.10
Day 1 High: $12.50
Day 1 Low: $10.80
Dey 1 High after Low: $12.50
High Since Debut: $12.50
Low Since Debut: $10.80

Day 1 Action: CRDO was likely willing to test the waters of the market due to having roughly 60% of IPO shares accounted for by investment bankers such as Blackrock who pre-committed to buying shares before IPO was conducted. After setting a price range at $10-12, and pricing the IPO at $10, things were not looking all that strong for this debut: further demonstrated by a heavy sell-side imbalance that presisted throughout the pre-debut crossing, as Goldman (and market makers) attempted to push the debut price up as high as $13.50 before acquiescing to sell-side demand and going live at $12.10. As a rule, I’m not gonna buy into an IPO debut where the sell-side imbalance shows prominently throughout the crossing, and the ensuing opening movement demonstrated why: as the price dropped hard to an ultimate bottom of $10.80 before baselining at around $11.00. The stock managed to launch a 30 minute rally into the turn of Power Hour, with a run up as high as $12.50 before failing in the final 30 minutes back down to close at $11.65. $11 is probably a pretty fair price to enter this trade if you like the company, so perhaps it was a safe play to test a position at $11 and exit at the open (or above with a stop loss), but not really enough movement to make this one all that interesting on Day 1 for any kind of high conviction trade.

Day 2 Action and Beyond: Day 2 gave a little bit of an upward move in the opening hour with a push up over $12 that tapered off back down to the $11.50 zone, and joined the rest of the market’s rally through the afternoon to again break through $12, but every rally in this one so far has been sold off back to the $11.50 region, and CRDO closed the week at $11.19.

Looking Ahead: The bottom on CRDO seems to be protected for the time being at around $11.00, but sellers appear to be taking profits whenever it tops $12.00, so this could be range bound in the short term. We don’t have options or shorting available yet: if this continues to trade thinly and the market continues to feel pain, shorts may sense weakness and push this down even further. I’m not sure it’s time to move in for a long position on this one if you like the company, but if we get down to $10 or below, that would be an attractive base for a rebound. Keep an eye on this one once the market stabilizes, we have to expect that institutiona money had some sense of the reasonable valuation on this one when they committed to large positions at $10, and likely negotiated a bargain in order to buy in amidst a severe correction in the market.

+++

Knighscope (KSCP) – January 27, 2022 | 4M Shares
IPO Price: $10.00
Debut Price: $14.44
Day 1 High: $15.48
Day 1 Low: $5.91
Dey 1 High after Low: $6.71
High Since Debut: $27.00 (after hours)
Low Since Debut: $5.91

Day 1 Action: After heavily promoting a pre-IPO share offering on YouTube and CNBC ads, Knightscope confusingly launched their IPO with almost no announcements. Priced at $10, with a low float, this one debuted with a hefty premium at $14.44, likely prompting many IPO holders to flip their shares on the debut: as it dropped immediately into a halt at $13.00 and continued to fall through 3 halts into a bottom at $6.84. One reason to avoid this debut, despite the apparent pre-debut demand, was that the ticker had not been registered with several trading desks, including WeBull and TD Ameritrade: and when I hear that buyers are not able to place orders, I can only assume demand will fail to materialize. Day 1 only saw volume of 1.6M shares, which basically means it was all but ignored by day traders who sometimes run low-float IPOs through the roof. The stock traded for most of the day in the $7.00 range, but ultimately fell off at the end of the day to post a low of $5.91. We did notice, and pointed this out on the live streaming coverage, that there were Buy Orders being posted at catch-points below the current price throughout the day that indicated someone (or some groups) were accumulating shares, and foretasted a potential pump in the near future… it would come sooner than I expected.

Day 2 Action and Beyond: Day 2 started out looking auspicious with a brief pre-market spike that ran from around $7.00 to touch $11.75 over the course of about 8 minutes. In hindsight, it appears that someone was buying up the overhead float to clear space for a run later in the day. The stock settled back do to as low as $6.20 before the market open, and appeared to be comfortably stable in the $6.60-6.80 range for the first 1.5 hours of the day. But at around 11:00 AM EST, what would eventually grow into a monster run began forming. The stock caught fire, and first ran up to $10 (the IPO price), flagged, and held the $12 level before falling off a little going into the turn at Power Hour before falling back down to $10. But the run wasn’t over, as momentum into the close pushed it to finish regular trading hours for the week at $16.29.
But wait, that’s not all folks: after-hours trading saw insanity pour into this one, and it touched as high as $27.41 before finally the end of extended trading hours wrapped up with the final trade marked at $22.20.

Looking Ahead: I don’t know where this one goes from here, but seems pretty dangerous to chase it, and don’t think there are shares available to short it. Maybe keep an eye out for options availability, but usually low float stocks don’t have them: would be pretty tempting to buy puts on this one if they become available. At some point this destined to fall.

+++