Akanda Corp (AKAN) – February 25, 2022 | 4M Shares
Price Range: $4.00
Offering Size: $16M
Shares Outstanding: 28.9M
Overview: This UK based company grows, manufactures, and distributes medical grade cannabis products, with facilities based out of Lesotho, Africa, with plans to open distribution in the United Kingdom and globally. They have not yet exported any cannabis products, or received any revenue from the sale of cannabis.
Considerations: This is certainly not something I would invest in based on basic business fundamentals, and don’t think that cannabis has much buzzworthiness to it these days. The market is in a serious funk right now, and if the current sentiment persists throughout the week, then I don’t think this will get much attention. The float is not low enough to be ultra-low float, so unless there is some kind of insider manipulation, I don’t see how this does anything but drop. The only wildcard is that it’s a Boustead offering, an underwriter that, for a time, seemed to produce demand out of thin air for every IPO it brought to market. But we’ve seen a number of poor performers recently, notably with VINE and HTCR getting dumped and/or hit with short seller attacks that provided relatively limited upside for debut trades (and nothing like the ripping halt-fests we used to see in their offerings).
Unless this is some kind of money laundering play for the Kingdom of Lesotho, I believe this is an IPO worth avoiding. Once the total shares outstanding are added to the float, this will become a very thinly traded stock, so beware.
Growth Numbers: No revenues
Baseline Financials: No revenues
Notes from the F-1:
– Funds will be used to purchase property, plant, and equipment including construction of greenhouses, drying facilities, and an extraction facility.
– Risks: Highly competitive environment, regulations, success in cultivation
– Important to Know:
“the Representative may in its sole discretion and at any time without notice release some or all of the shares subject to lockup agreements prior to the expiration of the Lock-Up Period.”
So basically, the float could balloon at any time.
IPO Classification: Low Float
Recent Similar IPOs: VINE FLGC
Trading Strategy: I don’t see an angle here unless there are unknown strings that get pulled in rigging the float pre-debut. Were I able to pay attention to the pre-debut crossing, I’d be watching for low volume in the imbalancing numbers, and normal price action (likely to debut at $3.00 – $4.20): anything abnormal might indicate that something unexpected could happen. Either way, given that this is available for allocation requests on WeBull, I would expect a heavy sell-side imbalance on the pre-debut and an initial drop off the debut. So if you do see something compelling in the IPO pre-trading process, and there’s NOT a heavy sell-side imbalance, it may be worth a play. If there is something compelling in the IPO pre-trading process and you still see a sell-side imbalance, there may be an opportunity to pick off a dip-to-rip play with a debut trade set about 10% below the indication price, but this is pretty risky.
I simply don’t see anything compelling enough about this IPO to make it worth trading, but we’ve seen crazier things happen.
Brand Name Recognition: None.
Debut Trade Conviction Level: Very Low.
Cariloha (ALOHA) – February 25, 2022 | 2.3M Shares
Price Range: $9.00 – $11.00
Offering Size: $25M
Shares Outstanding: 12.3M
Overview: This company makes bedding an apparel from bamboo products, and a core sales strategy involves marketing partnerships with cruise lines. Their growth numbers are weak, with negative baseline financials, and this is another Roth Capital offering.
Considerations: I didn’t like this one when it was scheduled to debut last week, and it’s not looking any better to me this week (even with a reduced price range). Here’s what I wrote last week:
Hard to find something less appealing: I mean, ok, it’s an alternative material that is probably at least billed as ‘eco-friendly’, but when your key marketing partnerships are all but shut down due to ongoing COVID restrictions, and you have nothing attractive in your financials (ok, we got 61% gross margins), why even attempt an IPO? And the underwriter is Roth?! When things are this bad, I start wondering if something’s up. Gonna have to circle back to this one, but topically, it’s not something I’d like to get in bed with.
– Revenue Growth: +1.2% for 9 months ending September 30, 2021
– Gross Profits: +6.7% for 9 months ending September 30, 2021
– Gross Margin: 61% for 9 months ending September 30, 2021
– Cash Flow: negative – improving
– Net Income: positive
– Operating Profit: positive
Notes from the S-1:
Underwriters: Roth Capital
IPO Classification: Low Float
Recent Similar IPOs: hmm… maybe VINE: it was so bad it had to crash, and crashed on such a low float that it had to eventually get pumped.
Trading Strategy: This IPO is gonna bomb unless it’s a hidden Stealth setup. It’s bad enough that perhaps a trading group corners it for a day or two and then pumps it..
Brand Name Recognition: Low.
Debut Trade Conviction Level: I don’t envision buying this on the debut under any circumstances, unless I somehow convince myself that it’s a Stealth setup. Probably won’t try to accumulate for a Day 2 pump on this one either… but will be watching the chart, Level 2 buying patterns, and feel it out.