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IPO Warriors IPO and LPX Preview for September 5 – September 9, 2022

September 5, 2022

While ‘Bulge Bracket’ banks (top tier underwriters) have been starved of any IPO action in 2022, with Chobani announcing the withdrawl of it’s IPO after initially filing to go public last November, the demand for lesser-known companies offered by second-tier underwriters has been white hot ever since HKD re-wrote the history books. And just when it seemed like the trading cycle had peaked in terms of hype and euphoria around the low-float setup, little known ATXG sneaked onto the calendar as an uplisting, and again reset expectations as to the possible limits for an IPO to achieve in a single day of trading, running from a low at $12.95 to an after-hours high of $1,999.99 in a single trading session. Sympathy moves in SHPH and BIAF have already shown the FOMO/MOMO effect that this even has had in refueling the fire in IPO trading, and we’re likely to see this trend continue again, until we stack up a few losers, as we had done going into last week.

Even deals with warrants have run: SHPH wasn’t really a warrants deal: the warrants executed automatically at the open of trading the commons, so it more like 2-shares-for-1 unit. But BIAF was a 2x warrants deal, that one ripped on the open. Granted, it was hot on the heels of SHPH and ATXG, but if that one can run, there’s reason to think that the next IPOs in the lineup can run as well. But does that make it a risk-free setup to go request as much of an allocation request as possible for the upcoming IPOs offered on WeBull? Perhaps, but there are certainly some potential pitfalls, and we’ll be breaking those down in this week’s detailed analysis.

The bigger elephant in the room is the distinction between the standard low-float IPOs and the Chinese/Asian IPOs: and within the latter, those that are truly ‘Stealth IPO’ setups vs those that are just riding the coat tails of the trend and using this opportunity to dump shares on US retail traders. While it still makes sense to allocate for as many shares as possible for any offerings brought to market by ‘usual suspect’ underwriters for these setups, the debut trade is getting far more risky, but with proper risk management and by following the clues we get in pre-debut indications and with background color we gather from the Street, we can make better informed decisions on how to trade these (presuming we’re only able to get limited to no IPO allocations).

The last point worth making here at the start of the week, is that we’re very likely to see additional IPOs added to the calendar by Friday: as underwriters scramble to be the next in line: with a window of opportunity to capture this unique moment in the IPO trading frenzy, which is likely to bring us increasingly dubious offers in addition to the possibility of highly lucrative Stealth setups added at the last minute. We’ll have to stay on our toes to catch the winners and avoid the losers, but it’s well worth the effort in this market: you gotta cast lures while the fish are biting!

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This Week’s IPOs:

  • Jupiter Neurosciences (JUNS) – September 7, 2022 | 2.5M Shares

  • Wearable Devices (WLDS) – September 9, 2022 | 3.6M Units

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Ok, Let’s jump in:

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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.

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