We have finally reached a point in the year where bulge bracket banks have decided to bring some mainstream IPOs to market: which is a good sign of at least a temporary reprieve in the ongoing slump that has beaten down the market since the start of the year, but far from a sign that there aren’t further down-slides ahead. Regarding the maintream IPOs on the calendar for this week, we tend to see the ‘first-out-of-the-gate’ mainstream IPOs to be priced at a level where there is minimal downside risk to institutional investors, and the pressure for underwriters to avoid a significant drop off the debut is relatively high. I interpret this as reduced risk, but am not necessarily convinced that retail traders are particularly excited about mainstream deals coming to the table right now, as there is far more interest in the low-float names on the calendar this week.

I believe that we may have reached an inflection point in the low-float IPO market with last week’s relatively tame debut of YOSH, and will be approaching this week’s lineup with a bit more caution, both in terms of the allocation requests I placed, and how I am approaching the debut setups of each IPO. I feel that we may have reached a point in the hype cycle around these names where retail has gotten a bit over-heated and ahead of itself, with front-run positions being overloaded while ignoring fundamental risks in the structure of the deals – let alone, no consideration for where the shares are being allocated or any ‘color’ on the deals from sources closer to the books.

We are also seeing what may be SEC scrutiny on some of the Chinese/Stealth IPOs, causing delays in debut that could be a portent of the end of the current run of insanely priced debut premiums that combined untempered hype with shady float manipulations. It would be an unfortunate end to a highly lucrative trade setup, though it does seem that the manipulators of these schemes will find ways to work around any regulatory scrutiny one way or another, and we’ll be on the lookout for these opportunities.

+++

This Week’s IPOs:

• Wearable Devices (WLDS) – September 13, 2022 | 3.6M Units
  

• Know Labs (KNW) – September 14, 2022 | 3M Shares (uplisting*)
  

• Jupiter Neurosciences (JUNS) – September 15, 2022 | 2.5M Shares
  

• Corebridge Financial (CRBG) – September 15, 2022 | 80M Shares
  

• Third Harmonic (THRD) – September 15, 2022 | 9M Shares
  

• Lichen China (LICN) – September 16, 2022 | 6.25M Shares
  

* Generally I don’t cover OTC uplistings unless I see something particularly compelling about them, which is why I’m not reviewing LNKB this week. Perhaps it runs, it’s lowish float (4.6M shares) but I understand far less about these setups and even less about bancorps, so gonna let this one pass.

+++

Ok, Let’s jump in:

Lockup Period Expiration (LPX) Watch:

Most IPOs are subject to either 90 or 180 day lockup periods before insiders and shareholders who owned shares of a company prior to the IPO can sell their positions. Typically, the dilutionary effect of this event will cause a stock price to drop, as supply increases without any fundamental changes in the value of the underlying company. Many investors will wait for LPX before starting a long term position in a company.
Conversely, with low-float IPOs, we often see press releases and other announcements dropped going into, or slightly following LPX, presumably as insiders attempt to drive up the share price before they are able to exercise their warrants and sell their shares.

+++

+++