Last week re-confirmed the theory that high-float IPOs are not great trades to enter off the debut, as supply simply outweighs demand, thus eliminating the chance that a stock sustains any kind of run off the debut. This week, we have a handful of low-float IPOs that will test the theory that virtually any IPO with a low float is worth a play, simply based on the limited supply coupled with the publicity of an IPO listing.
Ok, let’s jump right in.
iFit Health & Fitness (IFIT) – October 6, 2021 | 30.7M Shares
Leading off the week, is perhaps the only debut that carries any brand-name recognition, and with a standard float, this fitness equipment company sports well-known products such as NordicTrack, ProForm, and Freemotion among its leading products. Bolstered by subscription-based home-workout content with 1.5M paid subscribers, comparisons to PTON are inevitable. Unfortunately for IFIT, PTON has been in the dog-house recently, but given the stratospheric rise of Peloton’s shares, along with the significant discount at which IFIT Is coming to market compared to its rival, there may be significant retail interest in this debut. The company’s revenue is up 104% for the full year ending May 31, 2021 and Gross Profits are up 120% during this same time frame, and the float is a reasonable 30.7M shares. The market seems to have stabilized a bit here as of my writing this (Tuesday mid-day), so if we get some confidence in the market when this one debuts, we may have a solid setup for a debut play, and given the brand-name recognition, the overnight media cycle following the IPO could setup a run in the opening of Day 2 – giving traders an out if we don’t have a strong opening day, or possibly an opportunity to snag additional profits. Overall, this one seems like a solid play, so I’m likely to buy this on the debut for at least a partial position, and allow myself some flexibility to add if we get a dip to bring down my cost basis.
Healthcare Triangle (HTCI) – October 6, 2021 | 9.2M Shares
We covered this one last week, as they decided to push back their IPO due to adverse market conditions… not sure this week will help them much, but we’ll see. This cloud and data management software company provides SaaS products to healthcare and life sciences organizations. Over the past 6 mos ending June 30, 2021, revenue is up 20% and gross profits are up 32%, which are not bad numbers, but not amazing for a SaaS product: and their baseline financials for operating profit, net income, and cash flow are all negative. I tend to shy away from a tri-fecta of losses on those fronts unless there is strong brand name recognition, or something else compelling to the offering. In this case, the only checkmark in the ‘pros’ column is the low float of just 9.2M shares. In this market, growth/tech isn’t getting much love, especially if the path towards profitability is unclear, so I’ll probably pass on this one.
Volcon (VLCN) – October 6, 2021 | 3M Shares
Alright, our first ultra-low float candidate of the week: an EV manufacturer of off-road powersports vehicles (electric off-road dirt bikes and ATVs) that is already getting some social media buzz. Some are billing it as the ‘Off Road Tesla”, which is a bit of a stretch, but if it won’t take much interest to send this on a nice ride off the debut. I’m up for a play, and couldn’t ask for a much lower float – at least it’s not a pharmaceutical, so I’ll take a bite and who knows, maybe we even get a halt or two. The underwriter – Aegis Capital, handled IINN, which did offer a nice debut scalp play, and has been involved in some other micro-cap offerings for stocks that have gone on social media feuled runs, so there is a reasonable chance for this one to perform well off the open.
Life Time Group Holdings (LTH) – October 7, 2021 | 46.2M Shares
This is a high-end fitness center company, that was previously publicly traded until 2015, when insiders bought the company at a 73% premium and took it private. Since then, valuation has grown, but LTH was hit hard by the pandemic, as most gyms were forced to shut down. The argument FOR this company, is that whereas many other gyms were forced to permanently shut their doors, LTH will be poised to capture a significant piece of the re-opening market when people return to their workout routines. What makes this unplayable for me is the float – 46M shares is simply too many shares to reasonably expect a sustained run. I’ll be focusing my ‘maybe’ plays on those with low floats… and there are few we’ll take a look at here in a moment.
Cingulate (CING) – October 7, 2021 | 4.6M Shares
So, here we have a pharmaceutical company developing improved drug delivery technology for ADHD treatments for drugs that are already approved. I don’t know much about this, though I’ve read confirmations that poor release times are a pain point for ADHD medication (the irony that ADHD patients would be impatient is not lost on me), and would need to see a significant interest from social media traders to give this one a shot. As for me, I’m not sure it will hold my attention, nor that of other traders. Probably a pass.
Theseus Pharmaceuticals (THRX) – October 7, 2021 | 8.3M Shares
Pre-clinical cancer treatments with a focus on gastric cancer. Low float of 8.3M shares… doubt I’ll play this one. Float isn’t small enough to catch the interest of traders based on this measure alone, and otherwise, it’s hard to get excited about another early stage cancer treatment IPO. The risk of getting stuck in a low-volume position is not worth the limited upside potential.
IsoPlexis (ISO) – October 8, 2021 | 8.3M Shares
I like medical device companies with existing products and established customer bases: especially when they have a recurring revenue model. ISO produces a medical device that is used to analyze single-cell samples used in the development of curative medicines. Their customer base consists of the top 15 global biopharmaceutical companies by revenue, and roughly half of the comprehensive cancer centers in the United States, and their systems utilize a lineup of consumables in the form of chips and reagents that provide a source of recurring income from each customer that purchases their systems. Their growth numbers for the 6 months ending June 30, 2021 are impressive, with revenue growth at +103% and gross profits listed at +112% over that period. The one red flag is that they are operating at a significant loss, which has grown 402% in the 6 months ending June 30, 2021 — but that’s what high growth, innovative IPOs do, so take it with a grain of salt. Critically, the float is just 8.3M shares. If this can perform like PRCT off the debut, it will be a nice win.
Cognition Therapeutics (CGTX) – October 8, 2021 | 3.35M Shares
Alzheimer’s drugs have been the exception to the rule of disappointing pharmaceutical IPO debuts, so the fact that CGTX has demonstrated promising early-stage trial results for their lead Alzheimer’s candidate combined with an ultra-low float, could make this one worth playing.
Pyxis Oncology (PYXO) – October 8, 2021 | 8.3M Shares
Another pharmaceutical company that I would normally totally ignore, as their lead candidates are pre-clinical drugs for lung and breast cancer. However, they do also discovery work for monoclonal antibodies, which is, to some degree, a COVID play. They also have licensed two proprietary candidates from Pfizer, and the float is low enough that if there is any interest from institutional investors, it could move upwards. Probably not compelling enough for me to trade it though, as I’d rather roll the dice on the lower float plays that are debuting on the same day.
AEON Biopharma (AEON) – October 8, 2021 | 5M Shares
This company has a phase 2 candidate developed using botulinum toxins (the same toxin that causes botulism) for the treatment of migraines. Results for the current phase of testing are due in the second half of 2022, so I don’t expect many traders to hop on this bus off the debut, except perhaps for a ride on a low-float IPO debut. But considering the late addition of this company to this week’s IPO calendar, I think it will fail to register on many trader’s radars.
So in summary, no real blockbuster IPOs this week, but IFIT should get some media coverage, and VLCN is setup to be targeted by low-float IPO traders. The rest are mostly biotechs, and presumably, at least one of two of them will run. My picks from that category are ISO and CGTX… ISO is lowish float and already a has a proven product in the market, with CGTX the ultra-low float might be enough on it carry it on its own: but it also seems to have some strong reviews as a company and solid investors, so that puts it on my list of likely plays this week.
Note: the information contained in this newsletter is for informational purposes only. I am not a financial advisor, and this is not financial or trading advice. I may take positions in the equities mentioned in this article within the next 72 hours. Trading stocks is risky, you can lose money. Trade your own trade, and do your own research before making any financial decisions. Good luck out there.