With a shortened week and a nearly empty IPO calendar, it stands to reason that any IPO that went live this week would pique my attention for possible shenanigans.
As luck would have it, we’ve got a couple low-float IPOs slated to go live this week, and as goes for any low-float IPOs on the calendar these days, I’m on the look-out for clues of a Stealth IPO setup: connection to China, somewhat nondescript or shady sounding business, and of course, an underwriter among the usual suspects of running stealth deals. Well… let’s see what we find out on these.
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This Week’s IPOs:
Zhong Yang Financial Group (TOP) – June 1, 2022 | 5M Shares
bioAffinity Technologies (BIAF) – TBD | 1.5M Shares
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Ok, Let’s jump in:
Zhong Yang Financial Group (TOP) – July 1, 2022 | 5M Shares
Price Range: $5.00 – $6.00
Offering Size: $27M
Shares Outstanding: TBD
Industry: Financial
Overview: This company operates financial services out of Hong Kong, and advises clients on securities, futures contracts, and asset management. Ok, so clear ties to China and if there has ever been a low-float Chinese IPO capable of knowingly manipulating the volume of shares trading on their debut and the subsequent halts that ensue, it would have to be this one.
Considerations: So… let’s recap some key points:
– Debuting on an abbreviated market holiday week…
– Clear ties to China…
– Priced at $5-6 on 5M shares…
– The underwriter is Univest Securities: the underwriter involved with TIRX, UPC, QLI, and other shady low-float Chinese IPOs and secondary offerings.
I’m gonna go with the hypothesis that this is a Stealth IPO, and will approach the debut accordingly.
Growth Numbers: don’t really matter
Baseline Financials: also, not relevant to the play we’re looking for here.
Notes from the F-1:
Underwriters: Univest Securities | Valuable Capital Limited
IPO Classification: Stealth IPO
Recent Similar IPOs: OST VEDU
Trading Strategy: The setup to look for on this IPO is the debut price and volume. If we see the volume of the opening print around or below 120,000 shares, that’s a good sign: lower is better. The debut price we’re looking for is around or under $16.00… anything above that starts getting ultra-risky. There’s a pretty good chance that platforms like WeBull will flub this ticker entirely on the debut, or will not be showing the pre-debut indication. Playing this blindly is pretty risky, but a limit order at $16.00 has traditionally been sufficient to get you into the plays that work, and keep you out of the plays that debut at such a premium that they offer no upside play.
If we do see a debut around $15, expect halts up to the mid-$20’s and possibly higher. The reversal will come in the form of halts the other way, and likely will baseline from there, but things get speculative from there. Often, we’ve seen reversals that establish a baseline, and proceed to climb into an EOD run that exceeds the initial spike highs. But the reverse is just as likely, and you have to expect that at some point this stock is returning to below it’s IPO price, so if you’re in a position to take substantial profits, do it. If you load up on the initial debut, consider selling out of your position in three or four trades: on the beginning spike, on an EOD run, and hold a small piece for an early Day 2 spike if the setup going into the close of Day 1 looks strong.
I won’t chase if I miss the opening spike, and will take profits without regret if I manage to get in on the debut and ride my position up through a couple halts.
Oh, and if the debut price is something ridiculous, like $20+, it’s not worth the risk: we’ve seen these debut as high as $45 and come crashing down from there. Don’t do it.
Brand Name Recognition: Low.
Debut Trade Conviction Level: High.
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bioAffinity Technologies (BIAF) – TBD | 5M Shares
Price Range: $6.75
Offering Size: $10M
Shares Outstanding: TBD
Industry: Financial
Overview: This is biotech diagnostics company developing oncology screening products, with a lead test in the FDA pipeline for lung cancer screening. Their tests boast the potential to reduce the number of invasive procedures (biopsies) for patients during the diagnostic phase. They also develop targeted therapies through a subsidiary: OncoSelect Therapeutics.
Considerations: I mean, this is a biotech, albeit with a low-float, so not something I expect to unfold as a Stealth IPO, though we’ve now seen a string of lesser-publicized ultra-low float IPOs debut into a couple of halts to the upside, so perhaps an opening debut trade is worth chancing for a single halt upwards.
Growth Numbers: Still in development mode
Baseline Financials: N/A
Notes from the F-1:
Underwriters: WallachBeth Capital
IPO Classification: Low Float Biotech
Recent Similar IPOs: OKYO STSS
Trading Strategy: This one will likely follow the pattern we’ve seen in most of the recent ultra-low-float IPOs that have either been dumped right away or spike up through one or two halts to the upside before going into free-fall in the opposite direction. Determining whether it will boost upwards off the debut seems to be foreshadowed in the pre-debut indication metrics: whereas a buy-side imbalance, lower volume of paired shares, and a debut premium to the IPO price indicate the possibility of upside moves; a sell-side imbalance, higher volume, and a pre-debut price indication below the IPO price tend to result in a drop right from the opening trade.
If I do see the setup I like in the pre-debut indication on this one, I won’t tempt more than a single halt to the upside, almost certainly exiting any position I have right out of the first halt (if we get one).
Brand Name Recognition: Low.
Debut Trade Conviction Level: Medium.
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