Apologies for the delayed delivery, but wanted to wait to see if anything was added to the calendar this week after Monday, and then got caught up with some things yesterday… given the performance of today’s IPOs, I don’t think you missed out on anything (and if you follow me on Twitter, you got the CING prediction that proved to be very accurate).
Ok, let’s jump in.
So, we already got CING and REFI
Cingulate (CING) – we’ve covered this one for weeks, so if you regularly read this newsletter, you’re familiar with it. Low float biotech with warrants involved, so generally not a great setup. Priced at $6 and debuted at $5, then dropped to as low as $4.05. These tend to consolidate at a bottom and then make some weak breakout runs. Unlikely to get much further than $5.00 today, but if it drops below $3 in the upcoming weeks, could be an interesting hold for an eventual headline to send it up to the $6-7 range. Beware of a followup offering at that point.
Chicago Atlantic Real Estate Finance (REFI) – A financing company that provides primary lines of credit to the cannabis industry. Might be an interesting long term business, but not a particularly attractive IPO debut trade so I wasn’t playing it. Debuted at $16.40, little bit of down/up action, currently at $16.46 as of writing this, so kind of what I predicted. This is the kind of IPO debut where maybe you can extract a point here or there in timing the bottom, but not really worth the time and effort in my opinion.
Ok, now let’s focus on what’s left in the week:
HashiCorp (HCP) – December 9, 2021 | 15.3M Shares
This is a leading cloud-based SaaS that allows enterprise level clients to simplify and automate their IT infrastructure. A year ago this would have been a red hot debut, with fears of inflation at the top of investors minds, it will be interesting to see how this IPO is received by the market, given it’s impressive growth metrics and position as a leading cloud/data company that gets comparisons to MongoDB and Snowflake – both of whom defied the recent trend of tech companies tanking even on good earnings reports.
HCP boasts revenue growth up +50% in the 9 months ending 10/31/2021 and +74% for the full year ending Jan 31, 2021, along with gross profit up 56% over the 9 months ending 10/31/2021 and +76% for full year ending Jan 31, 2021. Margins have come up to 84% in the past 9 months from 81% for FYE Jan 31, 2021. On top of that, they claim customer retention of 127%, and operating losses are shrinking along with net income. Cash flow is the only major concern here, as it appears to be increasing: and this is perhaps my only concern with how the market will receive their debut. On one hand, the market seems to have a short memory, and appears to have all but shrugged off last week’s Fed statements about impending interest rate hikes and inflation: on the other hand, the Fed has more announcements coming in next week.
The low float of this stock makes it an attractive IPO play, and while it was offered to retail investors through WeBull and other trading platforms, if the allocations are tiny, that indicates a good sign. If they are substantial, I’ll be weary of this, as it would indicate a lack of interest from institutional investors.
Usually, a company with this profile would be an obvious debut buy, for a 1-2 day hold. In this market, I still think it’s a play, but if I’m given the opportunity to take profits on Day 1, I will, and don’t want to still be in this trade by next Tuesday, when I have uncertainties about what J-Pow’s next statements will do to the market.
Note: I’ve also put in an allocation request for this one, and will post on Twitter what kind of allocation I receive, if any. A high allocation generally indicates low demand, and would serve as a warning against taking a position on the debut. A minimal or zero allocation would give me confidence to trade this with a substantial opening buy at the debut price.
Nubank (NU) – December 9, 2021 | 289M Shares
Nubank is a rapidly growing digital bank serving the Latin American market, and is backed by serious institutional investors including Warren Buffet. Just about everything about Nubank sounds incredibly positive: addressing a large and undeserved market, exceptional growth, and a passionate customer base.
Their revenue growth is up +99% in the 9 months ending Sept 30, 2021, but they swung to cash flow negative (about -$1B) during that period.
What I don’t like about this IPO is that the float is huge… like, enormous. So even at a very accessible price point of $8-9 on the IPO, it would take substantial retail demand to substantially move this share price up to a degree that would make this an exciting debut trade for me. Additionally, existing shareholders are planning to sell 43.4M shares, which indicates to me, that they are not anticipating much of a short-term upside to this stock. I also expect that retail allocations will be high: another indicator of poor debut performance. Interesting to watch this, but won’t be trading it.
NeuroSense Therapeutics (NRSN) – December 9, 2021 | 1.84M Shares
This is a biotech with a low float. That’s the story. They have drugs in Phase 2 clinical trials with ‘orphan drug’ designation, and they are addressing ALS, with other applications to address Alzheimer’s and and Parkinson’s. The IPO has warrants, so I dunno, probably a pass. But then again, the float is micro, so who knows. I put in for a small allocation request on WeBull to gauge what level it gets filled. Seeing that it’s still available for more orders, I tend to think this one is not going to be that hot. Anyway, don’t want to get stuck in anything given what’s possibly on the calendar for Friday.
Austin Gold (AUST) – December 10, 2021 | 3M Shares
Also rescheduled again and again from last week (and the week before, and the week berore…), this one is a gold prospecting company based out of Vancouver with claims in Nevada. Their website is laughably bad, with no updated information, and some pages showing error messages. Interestingly, the CEO just sold his previous gold mining company, Pretium Resources, for $2.8B at a significant premium for shareholders, so this does look somewhat legitimate. On the downside, the market has not been too friendly to Roth Capital IPOs, so I’m not sure this will get much immediate retail demand. Then again, gold is considered an inflation hedge, and perhaps that brings this one some attention. Maybe one to watch, but unless the temperature of the social buzz around this one gets hot, I’ll be watching it from the sidelines.
Sidu Space (SIDU) – December 10, 2021 | 3M Shares
Ok, so this is the one I am most excited to share with you, and since it wasn’t added to any of the IPO calendars until Tuesday, was what makes the patience for this newsletter likely worth the wait.
This company is a satellite technology producer offering rapidly scalable, low-cost satellite services that aim to make space-based data accessible to companies of all sizes. They are part of a consortium that won a NASA contract last September (NASA Human Exploration and Operations Mission Directorate), so they will be generating some revenue from that, and current revenues $1.8M in 2020 and $885k in the 9 moths ending Sept 31, 2021…so, not too sexy in terms of growth or financials.
BUT, what makes this an attractive play is that it is a Boustead Securities offering with a low float, in an exciting industry. So we expect day traders to jump in, rip this through a halt or two, and then … well, I don’t know what happens from there, and I’ll be out of the trade by then anyway. Maybe it goes crazy as day traders pile in, maybe it crashes: the space puns write themselves… ‘to the moon’ or ‘crash and burn’, either way, it’s setup for a debut spike. So get in on the opening trade, sell at least part of your position out of each halt, and if we’re lucky enough to see 3 halts, sell the rest. That’s my plan anyway, and I doubt I’ll stick around for a 3rd halt. By next week this will almost certainly fallen out of the sky.
Note: the information contained in this article is not financial advice, and I am not a financial advisor. This is just information to give you ideas so you can do your own research and make your own trading decisions. I will most likely be taking positions in some of the equities listed in this email. Previous success is not an indication of future performance. Trading stocks is risky, you can lose money. Good luck out there.