This week brings us the first mainstream IPOs of 2022 – with a SAAS and Private Equity firm leading the way, and a suspicious low-float IPO thrown into the mix for good measure. These are all on Thursday, January 13, 2022, so….
… I think I’ll try to LIVE-STREAM these debuts on my YouTube Channel, starting coverage at around 9:45 AM EST.
Alright, so before I jump into the IPOs for this week, let’s take a moment to talk about market conditions: basically, the market has been getting slammed for the past week, especially anything labeled as ‘growth’ or ‘tech’. This generally has a negative effect on IPOs, in the sense that new companies are generally defined as “growth” by nature, but as a retail buyer, this may present unique opportunities to buy into new companies at a reasonable price. We saw that during periods of relative market weakness in 2021, IPOs debuted at prices that provided solid upside ( ex. GLBE and GFS).
There are two ways to think about these however, as many IPOs will simply get pulled in weak market conditions as they opt to wait for better opportunities to raise money from the public market to emerge. One line of reasoning believes that if a company IPOs in a weak market, they must be desperate for capital un unable to raise funds in the private market. But on the other side, it may be a sign of strength for a company to be able to execute an IPO even in a weak market. Time will provide the answer in terms of real value, but in terms of debut plays, I find that immediate returns are more diminished in IPOs during weaker markets, though the chance that a bag holding position drops significantly further from the debut price seems to be reduced.
Alright, let’s jump into this week’s IPOs:
Hillstream Biopharma (HILS) – January 12, 2022 | 3M Shares
This is a pre-clinical biotech: suffice to say I won’t be touching this off the debut, and likely will just put it on watch for any sign of activity around the quiet period expiration. They focus on ‘iron-mediated-cell-death” as a new approach to fighting solid tumors, and are currently performing a clinical pilot study in Germany, with plans to submit their Investigational New Drug application to the FDA in 2022, so they are a long way from any kind of serious breakthrough headlines. Pass.
FGI Industries (FGI) – January 13, 2022 | 2.5M Shares
There’s no doubt that low-float IPO debuts present a risky debut trade. In 2021, we saw many rip through multiple halts to the upside and eventually they became over-bought in the pre-debut, culminating in a string of overly risky trades whose initial trading price could not sustain much of an upside, resulting in dramatic – and painful – reversals through halts that were nearly impossibel to mitigate with stop losses or other safeguards (ex. MYNZ and SIDU). Then last week we say HOUR run from an opening trade of $4.50 to a high of $10.30 for a potential 130% win: so clearly the low-float debut has potential.
FGI is a well established kitchen and bathroom products supplier that sources products from China with a global distribution. They claim revenue just shy of $130M for the 9 months ending September 30, 2021, so they are a ‘real’ company with actual sales. The underwriter is The Benchmark Company, who recently brought us AERC: which went on an insane rally from an opening trade at $40 to a top over $100 from an IPO price at $10, and BFRI: which gave a small profit opportunity on the IPO debut from $4.09 to a top at $4.60 before trailing off over the next couple weeks to $2.40 before blasting off to over $10.00 over a 3 day run, followed by further gains as high as $14.63 in the following weeks (it’s now bac down to $5.32). Suffice to say that The Benchmark Group has delivered some volatility in it’s IPOs that warrants some attention as they bring this low-floater to market.
Justworks (JW) – January 13, 2022 | 7M Shares
This software company provides payroll and other HR services to small and medium sized businesses, and while it does deliver on both growth – revenue up 40% in the 3 months ending August 31, 2021 with Gross Profit up 40% over the same period: and decent baseline financials that being cash flow positive while operating costs and net income remain negative despite moving in the right direction; the gross margins are pretty slim and I’m not sure this market has much of an appetite for anything that isn’t a bit more sexy than HR software. I’m not sure if the float on this one is low enough to attract day traders, and I’m not sure there will be much retail demand for this company right off the bat. I’ll probably just watch this one and take notes. It’s sort of the first IPO of the year for a company that isn’t either a biotech or super-low float debut, so I think many other prospective IPO candidates will be watching this one closely. It wouldn’t necessarily surprise me if one got pulled mid-week.
TPG Partners (TPG) – January 13, 2022 | 33.9M Shares
Here we have the first credible mainstream IPO of the year, with one of the largest global private equity firms in the world deciding to proceed with their IPO despite shaky market conditions. On one hand, asset managers like Blackstone (BX) have seen their share prices fly since the March 2020 COVID drop, but on the other hand, they have been hit pretty hard since the recent pull-back starting mid-November 2021. TPG brings solid numbers across both growth metrics and baseline financials: revenue up 590% in the 9 months ending September 30, 2021 and Profit up 84% over the same time frame plus positive cash flow, net income, and operating profit. In this market, maybe retail traders get a fair price on the opening debut, but with a full-sized float of 33.9M shares, I’m not sure there’s going to be sufficient demand for any new issue, so taking a position on the debut seems unnecessarily risky to me, but a debut below the IPO price plus a dip might be too enticing to pass up. Will be watching this one regardless just to get a sense of how IPOs are being digested in this market.
As mentioned above, I’m planning to live stream these IPO debuts on Thursday, January 13, 2022 starting around 9:45 AM EST. Catch me on YouTube here:
See you there!
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.