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IPOWarriors IPO Preview for April 18 – April 22, 2022

April 20th, 2022

The market has been somewhat tame this week, but that is likely to change with Jerome Powell speaking on Thursday at 11:00 AM EST, which could determine whether some of the IPOs on the calendar for this week debut or not. We’re back to a slate of exclusively low-float IPOs of the generally garbage variety, but as we’ve seen again and again, that doesn’t mean there aren’t great opportunities to take substantial profits when played properly.

Last week we saw a rather unimpressive debut by STSS that saw the share price cut by more than half from it’s IPO price in the first two days of trade: so while that wasn’t a great for IPO buyers who paid $4.25 per unit (1 share and 1 warrant), it provided a prime opportunity for those who patiently accumulated a position around $2.00 and below over the first two days of trading, as Day 3 delivered a substantial run that topped out at $3.74. This is the kind of setup we’ll be looking for in the plays this week: the key is not to press if the ideal setup doesn’t emerge, and take profits on any significant spike: these runs don’t last long (STSS quickly returned to $2.03 the day after and despite some residual recovery, is more than likely to be heading into the $1 bin here in the next few sessions).

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This Week’s IPOs:

  • Lytus Group (LYT) – April 21, 2022 | 3.25M Shares

  • SOS Hydration (SOSH) – April 22, 2022 | 1.6M Units

  • Aclarion (ACON) – April 22, 2022 | 2M Units

  • JE Clentech (JCSE) – April 22, 2022 | 3.75M Shares

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I’m planning to live stream Friday’s IPOs starting just after 9:30 AM EST, please join me here:

https://www.youtube.com/watch?v=gEZfBan8KyQ


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Ok, Let’s jump in:

Lytus Group (LYT) – April 21, 2022 | 3.25M Units
Price Range:
$4.75 – $6.75
Offering Size:
$16M
Shares Outstanding:
37.4M

Industry: Streaming content | Telemedicine

Overview:
We haven’t seen all that many Indian IPOs in US markets: perhaps because India has it’s own robust stock market, so it’s interesting that this one is going live on the NASDAQ. The company claims roughly 8M active customers for its content streaming services (which in a country of 1.4B people, is basically nothing), and is planning to provide tele-health services in America through its Global Health Services Inc company. They are actively acquiring companies in the tele-health segment, but as those of us who have followed Doximity (DOCS) since it’s IPO, most physicians are already hooked into that platform. Their growth numbers are not really worth paying much attention to, as they had limited operations in 2019 and so 2020 comparisons once they started generating revenue were obviously impressive statistically, but cannot be considered to correlate to any future growth projections. Having said that, they did generate $12.3M in gross profits on $29M in revenue in 2020 with a gross margin of 42%.

Considerations: So… we can’t really get too excited about streaming content as a buzz-word in the market this week, given the hammering that Netflix (NFLX) took since it’s earnings report on Tuesday, and tele-health kind of already had it’s day in the sun during the pandemic lock down era, so I can’t expect social media hype to carry this one off the debut. The float is not minuscule – while 5M shares was considered tiny in 2021, the new micro-float level is really under 3M shares, plus there are warrants. So unless this gets manipulated from the inside, I can’t see any rationale in buying on the open. Who knows, perhaps a contingent of Indian traders could send this one soaring.

Growth Numbers:
– Revenue Growth:
0% for 6 months ending 31, 2021
– Gross Profits:
0% for 6 months ending 31, 2021
– Gross Margin:
0% for 6 months ending 31, 2021

Baseline Financials:
– Cash Flow:
negative
– Net Income:
positive
– Operating Profit:
positive

Notes from the F-1:
– 13% of existing shareholders may sell shares at any time (roughly 4.5M shares)
– 87% of the outstanding shares are owned by officers and directors as a group
– 90 day lockup

Underwriters:
Aegis Capital

IPO Classification:
Low Float

Recent Similar IPOs: RVSN LCFY

Trading Strategy:
This one is a bit odd, simply because it’s a foreign IPO out of India, and we haven’t seen one of these in recent memory. I will only play this on a debut trade if I see overwhelmingly strong buy-side strength, small opening volume, and a moderate debut premium. Even then, I’m more likely to sit and watch this one to see if it drops hard throughout the day. If I get a drop like we saw in STSS, then perhaps taking a position into the close for a Day 2 rally makes sense. I’ll keep an eye on this one for a 90-day LPX play in the future, as it stands to have a high volume of locked up shares that insiders will be eager to pump before they dump their positions.

Brand Name Recognition:
Low.

Debut Trade Conviction Level:
Low

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SOS Hydration (SOSH) – April 22, 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: Rescheduled from last week: not much has changed, except that STSS popped so traders will be watch.

Last week I wrote,
“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.”

Given the attention STSS no doubt stirred up with its Day 3 run, this one may get played out. The float is tiny, and food stocks are in vogue right now, so maybe I should pay attention to the debut on this a little more. If we see strong buy-side demand perhaps it can run.


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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Aclarion (SOSH) – April 22, 2022 | 2M Units
Price Range:
$4.50 – $6.50
Offering Size:
$11M
Shares Outstanding:
7.18M

Industry: Healthcare Technology

Overview:
Aclarion has developed a software product that helps surgeons identify the specific spinal disks that are causing pain in a patient. Revenue growth is not impressive, and gross profit is negative.

Considerations: Nothing particularly sexy about this one, and no indication that this is a Stealth play. It just looks ideally poised to crash and burn off the debut with little volume throughout the day. Maxim is the underwriter, so of their mixed-bag offerings, this is probably not one to buy on the debut. I’ll be looking to see how bad it plays out going into the end of the day, and if I see signs of accumulation, low volume on the day, and a price down around $2.00 I may take an overnight (or rather, over-the-weekend) play on this one and hope for an STSS-style rally.

Growth Numbers:
– Revenue Growth:
+15% in the 9 months ending September 30, 2021
– Gross Profits:
-59% in the 9 months ending September 30, 2021
– Gross Margin:
-9.6% 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: STSS RVSN

Trading Strategy:
My guess is that this one plays out like STSS, but perhaps will less of an upside, given that more traders will attempt to play the copy-cat move, which could keep the price from dropping far enough to make it an attractive Day 2 setup, and we may end up seeing a run at the end of Day 1 that kind of negates the Day 2 potential (see RVSN).

Brand Name Recognition:
None

Debut Trade Conviction Level:
Less than low.

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JE Cleantech (JCSE) – April 22, 2022 | 3.75M Units
Price:
$4.00
Offering Size:
$15M
Shares Outstanding:
15M

Industry: Industrial Cleaning

Overview:
This company sells dish washing systems in Singapore and Malaysia. So yeah, not particularly sexy stuff, although they do claim positive baseline financials across the board. I’ve never heard of the underwriter, as this appears to be their first IPO. The real question on this one, is whether we see a stealth-type debut setup like GNS (or EJH from last year), or is this just a random IPO that, like most of the others we’ve seen recently, generally moves downward with a short-lived reversal spike at some point at most.

Considerations: It sure sounds like the sort of sketchy/random kind of company that we saw rip into multiple halts off the debut in 2020-2021 (plus GNS last week). The only way to spot this is to watch the pre-debut indication price, and if we see it price at $5.00 and debut at like $13 or $16, there’s a pretty decent chance it could rip out of the gate. If it debuts up over $30, just stay away from it, and if it debuts below the IPO price, it’s probably just a dud like all the rest.

Growth Numbers:
– Revenue Growth:
+38% in the 6 months ending June 30, 2021
– Gross Profits:
+56% in the 6 months ending June 30, 2021
– Gross Margin:
22% in the 6 months ending June 30, 2021

Baseline Financials:
– Cash Flow:
positive
– Net Income:
positive
– Operating Profit:
positive

Notes from the S-1:

Underwriters:
ViewTrade

IPO Classification:
Ultra-Low Float

Recent Similar IPOs: EJH GNS

Trading Strategy:
It looks like a Stealth IPO and walks like a Stealth IPO… but is it a stealth debut? I dunno, if it’s not, it’s just an incredibly boring IPO trade that I have zero interest in holding long term… but if we see the right debut price premium, a low volume of shares being offered on the opening trade, and a buy-side imbalance, this could be a Stealth play worth taking for a debut entry.

Brand Name Recognition:
None

Debut Trade Conviction Level:
If I see the right conditions to indicate a Stealth setup, I’ll be pretty confident in taking a position off the debut. If not, then I’m not sure I’ll even try to build a position for a Day 2 rally given the float in comparison to SOSH and ACON..

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Quiet Period Expiration (QPX) Watch:

The SEC mandates that companies and underwriters refrain from making public statements for 40 days after an IPO begins trading. The QPX date marks a time when press releases may be issued that have the potential to move the stock price; especially companies whose price has dropped from the IPO.
These can present great trading opportunities ( I recommend this video here)

Upcoming QPX:

  • Akanda (AKAN) – 04/25/2022

Lockup Period Expiration (LPX) Watch:

Most IPOs are subject to a 180 day lockup period 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.

Upcoming LPX:

  • ARI Network Services (ARIS) | 04/20/2022

  • Minerva Surgical (UTRS) | 04/20/2022

  • Xilio Therapeutics (XLO) | 04/20/2022

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. I may have or take positions in the equities mentioned in this article in the next 72 hours. Trading equities is risky. Do your own research,and trade your own trade.

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