IPOs roared back into focus last week, and this week brings us another full slate of no less than 13 IPOs on the calendar as of today: of course, we may see more added before the end of thew week, unless the market continues to bleed out and some debuts get pulled. I’m hoping Monday’s bleed out reverses by mid-week, and gives us a shot at more fairly valued IPO debuts, and am preparing my strategies accordingly.
Be sure to join us while we live trade these IPOs in the IPO Warriors Reddit Thread:
So let’s jump in.
a.k.a. Brands Holding (AKA) – September 22, 2021 | 13.8M Shares
This company acquires and operates apparel brands that are targeted towards the Gen Z market with a direct-to-consumer model and a mobile-first marketing approach. Their leading brands: Princess Poly and Culture Kings comprise roughly 90% of their sales, and they boat very impressive growth metrics, with revenue +166% in the first half of 2021 vs 2020, and gross profits +170% over the same time period. The float is rather low, with just 13.8M shares, so usually I’d be keyed in on this one, but I’m not sure if these brand names are highly recognized amongst retail traders. It will be hard not to play a debut with this low of a float with such strong growth numbers, but I don’t know anything about this market: so if I do play it, it won’t be a very large position, and I’ll be quick to take profits early.
Toast (TOST) – September 22, 2021 | 21.7M Share
As a point of sale SaaS for the restaurant industry, Toast took a hit when COVID forced many restaurants to close or go out of business. But management showed its mettle with a quick pivot into turning out features to help restaurants offer their own delivery services, which allowed it to turn a crisis into an opportunity, and investors have been impressed. The stated 104% growth in the first half of 2021 vs 2020 might be a little bit misleading, given how bad Jan-June 2020 was for the restaurant industry, but also demonstrates that TOST is well positioned to capitalize on both re-opening or lockdown trades. The float is somewhat modest, and the IPO has been downsized since it’s retracted debut attempt in February ‘21. What I think will propel this IPO off the debut is brand name recognition, comparisons to Square (SQ) and Lightspeed (LPSD), and support from restaurateurs who view Toast as a more amicable delivery solution than Uber Eats, Doordash, and others. I’ll likely play this off the debut, and will adjust my position size depending on the debut premium, but expect to hold this for a Day 2 run. That being said, I’m gonna be playing all of the September 22 debuts with a short leash, as there are plenty of plays on the calendar, and want to keep spending power available.
Freshworks (FRSH) – September 22, 2021 | 28.5M Shares
As a CRM operating a crowded space, Freshworks has demonstrated stronger growth than it’s competitors, and could very well be a viable competitor to Salesforce (CRM). With sales growth over 50% in the first half of 2021 vs H1 2020, it is also a cash flow positive company with over 50k paying customers. The float is pretty standard, but not excessively large… I might try to ladder my bids at and below the debut price, but don’t want to miss this one entirely. Another potential Day 2 or even Day 3 runner. But again, want to keep my buying power freed up. My strategy for the week is flexible, but if I can get in-and-out of a string of these IPOs without bag-holding or taking a loss, I’m confident that the wins will add up. But again, this isn’t a bad stock to have to hold a bit longer if necessary.
Sterling Check (STER) – September 22, 2021 |14.2M Shares
This company handles background checks and monitoring for employers, that has rebounded strongly since initial struggles post-lockdown. With the economy re-opening, and companies trying to mobilize their work forces, Sterling Check is well positioned to get back to business as usual. Their growth numbers appear to be pretty strong on the surface, with revenue up 43% for the 6 mos. ending June 30, 2021 and profit up 42% for the same period, but when you consider that those H1 2020 periods were during the emergence of COVID, I’m not going to expect them to continue this growth rate once things stabilize. 14M shares is a relatively small float, but in order to get a run, we’ll need retail interest. Given the other IPOs on the same day, I’m not sure it would be prudent to put much focus on this one.
Knowlton Development (KDC) – September 23, 2021 | 57M Shares
A monster in the packaged consumer goods industry, this is one of those IPOs that industry insiders and institutional investors will eat up, while retail traders will likely be totally unaware of the debut. Kowlton provides end-to-end product development services for 18 of the largest 20 consumer packaged good companies, providing services ranging from R&D, to forumaltion, packaging, design, production, regulation, quality assurance, and more… They also have produced very impressive growth metrics year over year, with revenue up 96% and gross profits up 119%. The only question in my book is whether the 57M share float will outstrip retail demand once this company starts trading. Since we probably won’t see this one go live until later in the day on Thursday, whether I play this one or not will somewhat depend on the debut premium, and somewhat to do with how spread out I am in other plays.
Thorne Healthtech (THRN) – September 23, 2021 | 9M Shares
Personalized nutritional supplements that are custom tailored to each client, sold on a subscription basis with impressive profits +52% in the 3 months ending March 31, 2021 and revenue up 34% during that same period. They have free cash flow of $21.5M in the 12 months prior to March 31, 2021, and claim net profit, positive cash flow, and growth in profit margin. So, solid financials and a 9M share float: normally a definite yes, but in this crowded IPO week, and with the market a bit edgy, I don’t have a ton of conviction in this play. Probably one I’ll miss.
EngageSmart (ESMT) – September 23, 2021 | 14.5M Shares
Tech, growth, and a swing to net income positive in 2021, EngageSmart provides customer engagement software, and is taking market share away from competitors in a crowded space. For the 6 months ending June 30, 2021, they boasted a 58% growth in revenue, and profits are up 61% during that time. So these are very strong metrics, with a lowish float, so mostly ticks all the boxes I’m looking for… and I would guess this one goes live earlier than others in the day, so I’m likely to make a play on this one and ride it throughout the day unless I get stopped out. While I doubt I will take a loss on Day 1, I will keep the trailing stop tight if we get a boost off the open, as I will be trying to free up funds for a play on Friday that I expect to be a rather strong IPO play.
Sovos Brands (SOVO) – September 23, 2021 | 23.3M Shares
If you’ve heard of the food brands Michael Angelo’s, Rao’s Homemade, Noosa Yoghurt, or Birch Benders, then you might be a fan of Sovos Brands. I have never heard of any of these, so I have no frame of reference, and their growth numbers, while healthy, are nothing to get too excited about relative to their fellow debut plays: Revenue up 34% in H1 2021 vs H1 2020, and profit +28.6% over the same time frame. The float isn’t too high, but it’s also not that low, so there’s nothing particularly compelling about this debut, so I’ll pass in order to focus on other plays.
Brilliant Earth Group (BRLT) – September 23, 2021 | 16.6M Shares
This company sells ethically sourced jewelry targeting millennials and Gen Z’ers, with net income and growing cash flow. Revenue is up 78% in 6 months ending June 30, 2021 and profits up 94% in the same time frame. But I don’t know anything about this market, and am not sure the market will be all that excited about this debut. Retail IPOs are not generally all that explosive unless the underlying brand name is highly recognizable (see ON Holdings last week). Too much going on in the calendar for me to do more than watch this one, though if AKA does well on Wednesday, then maybe BRLT will follow suit. Have to see how my cards are stacked at this point in the week, but not particularly bullish, and want to avoid getting tied down in any low-conviction plays.
Remitly Global (RELY) – September 23, 2021 | 12M Shares
I’ll be continuing to check the pulse on this one throughout the week. I mean, if you told me there was a international digital financial services company that was generating 92% revenue growth in the past 6 months ending June 30, 2021 and 94% profit growth in the same period, with just 12M shares being floated, I’d likely say, “Yeah, I’m in for sure.” But when it’s ‘just another international money transfer service’, I have to do a double-take. They are moving towards operating profits, but they also compete head-to-head with Paypal’s Xoom service, Wise.com (Transferwise), and others. I’m not sure how much the average retail investor will get excited about this… interestingly, a search on Twitter for $RELY shows a large number of posts citing this stock from Japanese traders, so maybe an international contingent shows up to bump this one on Day 2? I’m undecided on this one at this point, my gut says “pass”, but my analysis says, “wait, are you sure?” Don’t wanna get stuck in it, and the float is low, so maybe I’ll wait and see if it dips off the debut, then maybe pick up some shares once the sellers exhaust their inventory.
Argo Blockchain (ARBK) – September 23, 2021 | 7.5M Shares (uplisting)
I don’t usually play uplistings, and given how badly crypto got hammered to start this week, I’m not sure a crypto miner is going to get much love on it’s move from the London exchange to the NASDAQ, but after watching FCUV fly off it’s debut, and WAVE do a ridiculous run on the day after it uplisted, and some have seen some unusual price action in ARBKF in the past week, so I’m going to be on the lookout for any attempt to pump the low float of newly issued shares on the debut. If we see volume start to get pumped, or a significant drop off the debut, it might be worth going in. Have to watch it closely, but this more likely just one to watch and possibly react to… definitely won’t just blindly buy the debut.
Cue Health (HLTH) – September 24, 2021 | 12.5M Shares
This is perhaps the most interesting play of the week to me, due to a combination of low float and being directly related to COVID prevention. Cue Health has developed what they refer to as “a lab that fits in your hand” – it is a testing device platform that produces COVID testing results in about 20 minutes. With large contracts already in place with the NBA and US Military, Cue Health intends on expanding into testing for pregnancy, fertility, respiratory, cardio-metabolic, and other health diagnostics. While there are no historical comps for gauging financial growth, their 2020 financials boat revenue of $200M and Product Gross Profit of $116M on 58% product gross profit margin. Coupled with a low float of just 12.5M shares, and amble social media hype already materializing, I am planning to dump whatever positions I may be tied up in to shift into this one on the debut. Expecting it to run for a few days, so may hold the position into next week. I can see this one catching some serious movement. It’s also interesting that this one will have some allocation of shares available to Robinhood customers, which typically means that at least some of the float will be locked up for 30 days.
I’ll take this moment to expound on some portfolio management strategy that I often use when I see an IPO that strikes me as particularly appealing. In my trading, I often target swing trades that I hope will produce short-term wins, and like to take positions in stocks that I don’t mind holding longer term if needed, should they fail to produce an immediate swing to green, or fade further than I expected. And despite my better judgement, I occasionally get sucked into chasing a breakout stock only to hold beyond the peak and get stuck in an upside down position (yeah, yeah, Rule #2: Don’t Chase, I know).
So basically, when I do get stuck bag-holding, I’ll use a high-conviction IPO as a catalyst for dumping my bags to free up a large cash position. It tends to work out, but of course, runs the risk of compounding my losses if the IPO doesn’t debut as hoped. Still, I’m currently sitting on more bag-holding positions than I care to see in my portfolio on a daily basis, and am strongly considering a fire-sale in order to take a large position in HLTH.
Clearwater Analytics Holdings (CWAN) – September 24, 2021 | 30M Shares
This is a SaaS for investment management & reporting for financial, asset, insurance, and large companies including Starbucks, Yahoo, Facebook, Garmin, and Netflix. With solid growth and high brand name recognition amongst financial managers, this is not a bad IPO, but the float is average, and I’m not sure how much general retail attraction this will garner. I mean, +24% revenue growth for the 6 months ending June 30, 2021 and +29% profits in teh same time period is not too shabby, but also not particularly explosive. It seems like a sort of ‘safe bet’ that is likely to move sideways and slightly upwards: maybe tack on $1-3 throughout the day, but I don’t expect it to do anything too dramatic. Still, I likely won’t play it for the simple reason that it is likely to go later in the day on Friday – almost certainly after HLTH, so I’ll likely be all tied up in that play (or otherwise keeping my funds available to go in on HLTH).
NOTE: This is not financial advice, and I am not a financial advisor. I’m just sharing ideas and am almost definitely planning to take a position in the securities mentioned in this newsletter. I was not paid for these opinions. Trading stocks is very risky, and IPOs are especially volatile, and you could lose money trading equities. Trade your own trade, and good luck out there.