Ok, so last week I put off sending out the weekly preview newsletter until we had a difinitive listing on the calendar, and since none came, I never sent anything out (also why I didn’t send out a recap at the end of the week). Fortunately, it seems like pressure on the banks to get some deals out has culminated in a fresh slate of IPOs this week, including our first mainstream IPO since CRDO in late January.
In my experience, when the IPO market takes a recess, the first ones to list out of the break generally have performed well: in part due to more tentative pricing, and also because day traders are less inclined to pile in on the opening trade. This week also brings us some IPOs of the ultra-low-float variety, and we may even see a Stealth IPO setup… but we’ll get to all this in just a moment.
As much as I’d love to live trade some of the IPOs this week – I’m still putting my life back together after evacuating Ukraine right before the war broke out and will be taking a short trip up to Lisbon with my family: back Thursday or Friday. Oh, and that reminds me: Friday is a market holiday, so keep that in mind when trading any IPOs on Thursday.
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This Week’s IPOs:
Genius Group (GNS) – April 12, 2022 | 3.27M Units
Excelerate Energy (EE) – April 13, 2022 | 16M Shares
Sharps Technology (STSS) – April 14, 2022 | 2.4M Units
SOS Hydration (SOSH) – April 14, 2022 | 1.3M Units
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Ok, Let’s jump in:
Genius Group (GNS) – April 12, 2022 | 3.27M Shares + 490k for underwriter
Price: $6.00
Offering Size: $22.6M
Shares Outstanding: 25.5M
Industry: Ed-tech
Overview: Before I get into the cut&pasted copy I’ve written over the past several weeks as this one has been repeatedly rescheduled, I want to point out that I don’t recall an IPO going through such a metamorphosis over the course of ongoing delays. This one started back in late February as a 7.3M share offering underwritten by ThinkEquity intending to list on the NASDAQ, to then getting cut in half and switching out Boustead Securities as the underwriter, with the intent on listing on the AMEX, to then pivoting again and switching to the NYSE. This week they pulled yet another audible and jumped up the listing date from April 13th to the 12th: when we used to see Stealth IPOs that flew from mid-teens to $30 and $40+ (some running up over $70 on Day 2), this tomfoolery was always a hallmark of the setup. So keep an eye on this one.
Ok, here’s what I originally wrote in Feb:
”This Singaporean company specializes in online and offline educational services, including corporate training for major corporate clients including Deloitte, J&J, Vodafone, Google, IBM, Heineken, Lenovo, DHL, HP, and many other recognized international brands. With over 1.9M students and 9,00 partners on its GeniusU platform, this is a substantial player in the ed-tech space. Unfortunately, COVID has hurt their bottom line, and there are many competitors in the space who have moved into the virtual learning sector.
Their growth numbers are not nearly as impressive as other ‘growth’ companies posted in the 6 months ending June 30, 2021… which is essentially comparing metrics against the worst 6 months of the initial wave of COVID lockdowns. So with revenue up 40% in that period for 2021, I’m just not all that impressed with this company as a growth story: coupled with negative gross profit over the same period, and I just don’t see this as a company that many investors will get excited about buying in on the IPO.”
My how things have changed since then.
Considerations:
Again, here’s what I wrote last week:
Ok, so pay attention… here’s what I originally wrote about GNS:
”There’s nothing particularly sexy to me about this IPO, as the float is a bit large for a ‘low-float’ play and the underwriter has delivered a mixed bag of hits and misses. I don’t see this as a likely “Stealth IPO” setup, but will keep an eye out for any indication in the pre-debut price matching that would indicate otherwise. It has been rescheduled once already, which generally means they were unable to attract sufficient interest in the IPO, and it is still available on WeBull for retail buyers to request allocations. Not sure what kind of catalyst they could deliver to save this down the road either: perhaps an announcement of a big contract with a major company. Just doesn’t really fit the blueprint for trading low-float IPOs in any regard: UNLESS it turns out to be a stealth IPO (more on that later)”
And here’s what I wrote last week:
”… alright, so now my opinion on this debut has COMPLETELY changed, you know why? Because Boustead Securities has taken over as the lead underwriter: replacing Think Equity, and reduced the float from 7.27M shares to just 3.27M shares. I guess Think Equity couldn’t fill their order book, but Boustead is taking a different approach, and is distributing shares only to corporate clients. If the float gets choked, or Boustead turns this into a Stealth IPO setup, there is a chance this flies.”
And now I’m more bullish than ever that this one goes to $30+ at some point tomorrow. Why? Because rumors are circulating that Boustead only gave out tiny allocations to its customers, and well, it’s Boustead and they need to save some face after fumbling the ball on VINE and HTCR.
Growth Numbers:
– Revenue Growth: 40% for 6 months ending December 31, 2021
– Gross Profits: -26% in 6 mos ending December 31, 2021
– Gross Margin: 62% (pro forma)
Baseline Financials:
– Cash Flow: negative
– Net Income: negative
– Operating Profit: negative
Notes from the F-1:
– Boustead has an option to pick up an additional 490k shares within 45 days of the offering.
—> It appears that Boustead already exercised that option.
– 12 month lock-up period for directors, 6 month lock-up period for shareholders
– 5M underlying share options at a weighted average exercise price of $6.41
– “Boustead Securities, LLC may, at its discretion, permit our shareholders to sell shares prior to the expiration of the restrictive provisions contained in those lock-up agreements.” … so yeah, don’t hold onto this if it spikes.
Underwriters: Boustead Securities
IPO Classification: Low-float IPO
Recent Similar IPOs: EJH CPOP AKAN SOPA TKLF
Trading Strategy: Gotta watch this one closely in the pre-market debut They priced it at $6 and Boustead controls nearly 500k shares, with their retail accounts getting probably about 100k shares total: they can pretty much dictate the debut price. So if it debuts with a premium in the $8-13 range, it could be a stealth setup that rips into a series of upwards halts. I would love to see that setup emerge. If it debuts at a ridiculous price, say, above $20, then I won’t touch it on the debut, and likely will just stay away from it unless it comes down to the $9-10 range from there, and even then, I’ll probably just watch and gasp if it rebounds and runs back up again. Have to assume that whatever insane price it reaches on Day 1 or Day 2, it comes back to earth within a week. If it somehow debuts below the IPO price, then I’ll watch for Day 1 dips to play Day 2 rips, just like any other low-float IPO we’ve seen this year with a few exceptions.
IF we do get the ideal stealth setup, look for the following plays:
Play 1: Buy the debut, sell out of the halts, watch for a top at $30+
Play 2: If it hits $30, it will spike down at some point and then likely level out. Play the level out into an end-of-day run.
Play 3: We’ve seen those EOD runs fall off and consolidate into Day 2 pre-market, then run hard into the open, and touch off new highs in the $70-80+ range.
Brand Name Recognition: Low.
Debut Trade Conviction Level: Intrigued… VERY intrigued
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Excelerate Energy (EE) – April 13, 2022 | 16M Shares
Price Range: $21.00 – $24.00
Offering Size: $441.6M
Shares Outstanding: 24.377M
Industry: Natural Gas Infrastructure
Overview: This 20 year old company specializes in delivering LNG solutions in established and emerging markets, with operations in Brazil, Pakistan, Bangladesh, Kuwait, Israel, UAE, and USA. Specifically, they operate a fleet of FRSU vessels which can be easily transported around the world to facilitate regasification of LNG for distribution into local economies. They also operate E-FIT terminals which speed up the time to market for LNG supplies. This IPO is perfectly timed to capitalize on global LNG constraints due to sanctions on Russian supplies and Western objectives to provide alternatives to meet global demand. Detractors point out that this companies fleet is comprised of older, steam powered vessels that are far less cost-efficient than more modern competitors, that their upper management that built the company has left since the peak in 2017, and current contracts are very short term engagements. However, with roughly 20% of all FSRUs currently in service, the current macro conditions could very well provide a market where quality and efficiency are less important than simply having FRSUs to operate for a profit.
In fact, it might just be enough that this is an “LNG Company” and LNG prices are soaring, for retail traders to pile into this one. The lowish float of just 16M shares makes it ripe for a run if that scenario materializes.
Considerations: Give the current market conditions, and that this is only the third mainstream IPO of the year (following TPG and CRDO), I expect underwriters to ensure that this gets priced at an attractive valuation for investors. As retail traders have been scared off of IPO debuts, I doubt this debuts at a ridiculous premium, which could set up a nice opportunity to buy any dips on Day 1 for a gradual rally over a week or more.
Growth Numbers:
– Revenue Growth: +187% in 2021 vs 2020
– Gross Profits: +443% in 2021 vs 2020
– Gross Margin: 36% for 2021
Baseline Financials:
– Cash Flow: negative
– Net Income: negative
– Operating Profit: negative
Notes from the S-1:
– An IPO with a Dividend? Yeah, you heard correctly, this is perhaps the first IPO I’ve covered that has stated the intention to pay any dividend at all: in this case $0.10 per share.
Underwriters: Barclay’s, JP Morgan, Morgan Stanley.
IPO Classification: Mainstream
Recent Similar IPOs: CRDO (more based on float and market conditions than anything to do with business model or industry).
Trading Strategy: I’d like to build a position in this one on Day 1, but whether I buy the debut or not will depend on what I see in the pre-debut indication pricing. If we see this debut at a slight premium with a prevailing buy-side imbalance heading into the opening trade, I may buy a starter position on the debut. If the prevailing imbalance is on the sell-side, and the debut price is at the IPO price, then I’ll wait for a bottom to slowly build a position: possibly over Day 1 and Day 2. Watch for baselines that indicate underwriter support for an ideal price at which to accumulate shares.
Brand Name Recognition: Low.
Debut Trade Conviction Level: As long as the IPO prices in the middle or low end of the range, and there isn’t a significant debut premium, then the downside risk on this play, at least in the short term, seems rather low. More likely that they price this one to ensure a reasonable upside on all fronts (as we saw with TPG), than try to pump it for every cent on the IPO pricing and debut. I also doubt this one goes ballistic to the upside either, although it’s not entirely out of the question that this gets some retail attention on Day 2, given that it can be spun as an LNG savior for the current shortages that are getting a lot of press these days.
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Sharps Technology (STSS) – April 14, 2022 | 2.49M Units
Price Range: $5.25 – $7.25
Offering Size: $16M
Shares Outstanding: 7.8M
Industry: Medical Supplies
Overview: This is a pre-revenue company that makes safety syringes designed to reduce the amount of wasted medicine that goes unused in discarded syringes. While the marketing pitches these devices as being able to save enough medicine to address global medical shortages: with specific reference to COVID vaccine demand, it’s a bit of a stretch. Each unit comes with a share and a warrant to buy a share.
Considerations: I mean, I don’t see this really catching on as an exciting IPO that immediately generates a high level of retail excitement, so the playbook here is likely to let it drop from say a $4.25 debut down to $2.60 – $2.80 and then catch a rip back up around $4 next week. Eventually they drop some headlines about distribution deal ahead of whatever LPX they have on insider positions, and run this back up to $5 or $6, but that’s gonna be in 90 or 180 days. (hint: follow Aly Angel for the longer term play on this one)
Growth Numbers:
– Revenue Growth: pre-revenue
– Gross Profits: pre-revenue
– Gross Margin: pre-revenue
Baseline Financials:
– Cash Flow: negative
– Net Income: negative
– Operating Profit: negative
Notes from the S-1:
– Insiders who are already holding a position close to 4.99% of the company are being given the option to buy a ‘pre-funded unit’ that gives them 2 warrants (instead of 1 share and 1 warrant). Under this pre-funded unit, they get 1 pre-funded warrant, and 1 warrant: as I understand it, this allows them to control a share in the pre-funded warrant without stepping into a full 5% ownership role in the company. I’m not sure if this is just to encourage more sales of the IPO, or an attempt by insiders to allow them to load up on more shares in anticipation of an ace they have up their sleeves that they plan to drop as LPX pump.
Underwriters: Aegis Capital.
IPO Classification: Pump and Dump material.
Recent Similar IPOs: BEAT .
Trading Strategy: I will probably avoid this one entirely unless it follows a very specific script of basically falling for the entirety of Day 1 into a further dip right before the close. Perhaps take a position there and hope for a Day 2 pop.
Brand Name Recognition: Low.
Debut Trade Conviction Level: The only conviction I have on this one is that it’s likely to drop and keep falling until day traders who regularly pump these plays have accumulated their positions and decide to run it.
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SOS Hydration (SOSH) – April 14, 2022 | 1.36M Units
Price Range: $4.50 – $6.50
Offering Size: $8M
Shares Outstanding: 7.03M
Industry: Health Supplement / Sports Drink
Overview: This is company has developed a hydration product based on the WHO’s rehydration formula with enhancements that they claim improves absorption and performance of the product. They do have a retail presence in large retail chains such as CVS, Walmart, and Whole Foods, along with online sales on sites like Amazon.com and Target.com. So this is like, actually a real company with revenue and a product that generally has very high customer ratings for its performance. Whether the market is ready to be enthusiastic about buying into the debut is another question.
Considerations: I’ll have to defer to social media throughout the week to get a sense as to whether retail traders are likely to get behind this one at all. With just 1.36M shares (plus an equal number of warrants), and a limited number of total shares outstanding, this one could get pumped simply as an ultra-low float IPO. But I’m not sure it’s sexy enough to warrant a debut buy: so I’ll be watching the pre-debut indication and most likely, just waiting to see if it drops into an attractive price range for a subsequent rebound.
Growth Numbers:
– Revenue Growth: +54% in the 9 months ending September 30, 2021
– Gross Profits: +42% in the 9 months ending September 30, 2021
– Gross Margin: 37% in the 9 months ending September 30, 2021
Baseline Financials:
– Cash Flow: negative
– Net Income: negative
– Operating Profit: negative
Notes from the S-1:
Underwriters: Maxim Group
IPO Classification: Ultra-Low Float
Recent Similar IPOs: OTLY
Trading Strategy: I’ll be paying attention to social media this week, as sometimes a cult-brand IPO gets enough support from its target consumer base and loyal customers to run it: think DNUT, BIRD, BROS, etc.
The float is so low that it may not drop as hard as others, especially given that it appears to have at least moderate brand name recognition. If it doesn’t perform well at all on Day 1, it could be a very interesting Day 2 setup, as this one actually could benefit from an overnight media cycle. I believe many of its loyal customers won’t be aware of the IPO until it the day after it debuts and headlines announce its IPO performance: so a Day 2 run is very possible.
Brand Name Recognition: Moderate
Debut Trade Conviction Level: Not high, but not completely disinterested. Seems like it could get enough support from a loyal customer/fan base to give it some legs.
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