{"id":106322,"date":"2017-05-22T11:15:00","date_gmt":"2017-05-22T15:15:00","guid":{"rendered":"http:\/\/countingpips.com\/?p=106322"},"modified":"2017-05-22T07:15:37","modified_gmt":"2017-05-22T11:15:37","slug":"your-ipo-cheat-sheet-for-june","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/05\/your-ipo-cheat-sheet-for-june\/","title":{"rendered":"Your IPO \u201cCheat Sheet\u201d for June"},"content":{"rendered":"<div id=\"inves-637629909\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">May 22, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_ipos_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_ipos_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_ipos_feature-300x155.jpg 300w\" alt=\"Your IPO \u201cCheat Sheet\u201d for June\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>Fake news is killing your ROI.<\/li>\n<li>The force awakens in IPOs.<\/li>\n<li>Forecasting a hot summer of IPOs.<\/li>\n<li>Also recommended: <a href=\"https:\/\/pro.agorafinancial.com\/m\/680655\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>\u201cChurchill\u2019s Ladder\u201d offline tomorrow (1,000% upside).<\/strong><\/a><\/li>\n<\/ul>\n<hr \/>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" \/><\/p>\n<p>Fake news and political mudslinging is at a fever pitch.<\/p>\n<p>Yet there\u2019s an opportunity cost to buying into the Beltway chaos.<\/p>\n<p>When truly valid storylines can\u2019t even make the back page, we all lose.<\/p>\n<p>I\u2019ll share one such example today.<\/p>\n<p>IPOs are performing admirably in the first half of 2017.<\/p><div id=\"inves-394932325\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>In fact, IPO year-to-date returns of 16.7% are better than twice the S&amp;P 500.<\/p>\n<p>The big IPO winner so far is AnaptysBio Inc. (NASDAQ: ANAB).<\/p>\n<p>AnaptysBio is a clinical-stage biotechnology company that specializes in anti-inflammatory protocols.<\/p>\n<p>So while CNN sparks \u201cfaux outrage\u201d on everything happening inside the Oval Office, they\u2019re ignoring companies trying to improve the lives of people.<\/p>\n<p>Only 10 of 2017\u2019s 46 IPOs are presently underwater.<\/p>\n<p>With nine more IPOs on the table \u2014 led by names like Yeti, Biohaven Pharmaceuticals and G1 Therapeutics \u2014 let\u2019s dive deeper into IPOs.<\/p>\n<p>I asked my senior analyst Martin Hutchinson to give our readers an edge heading into summertime.<\/p>\n<p>Hutch\u2019s full IPO report is below.<a name=\"video\"><\/a><\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<p><strong>P.S.<\/strong> Time is running out on \u201cChurchill\u2019s Ladder.\u201d I\u2019m projecting overnight gains up to 1,000% using the Ladder on Britain\u2019s snap election. <a href=\"https:\/\/pro.agorafinancial.com\/m\/680655\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>But access ends tomorrow.<\/strong><\/a><\/p>\n<hr \/>\n<p><script src=\"https:\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 56.88% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_2r29z23x9e videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Question:<\/strong> Martin, you\u2019ve agreed to help us compile a library of the most important investment catalysts. These are all baseline concepts that we believe every investor should know.<\/p>\n<p>Today, we\u2019ll be discussing IPOs, so let\u2019s jump right in. Let\u2019s start at the beginning. What is an IPO?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Initial public offerings (IPOs) are the traditional means by which companies sell shares to the general public for the first time, and thereby fund themselves short term and provide a platform for further funding for long-term growth.<\/p>\n<p>IPO volume dropped 36% in 2016: 112 IPOs raised $21.6 billion. And that was the smallest volume since 2009. But there\u2019s been a recovery in 2017, with a big $4 billion IPO for Snap Inc. (or the Snapchat company) in March. Although that company recently reported first-quarter earnings that weren\u2019t that happy.<\/p>\n<p><strong>Question:<\/strong> Martin, are IPOs any type of indicator that can tell us a little bit about the underlying economy or the underlying stock market?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Yes, in general, IPOs tend to be more common at the top of markets. You\u2019ve had a slight anomaly in this latest cycle in that you\u2019ve had a lot of private equity financing for companies.<\/p>\n<p>Private money has become much more aggressive. You\u2019ve got unicorns (private companies with a $1 billion valuation) \u2014 even decacorns (with a $10 billion valuation).<\/p>\n<p>Uber, the online taxi service, was $65 billion at its peak. That means those companies don\u2019t need to IPO until later, and some may never reach that stage.<\/p>\n<p><strong>Question:<\/strong> What do you attribute the change in sentiment over the last 10 years in IPOs to?<\/p>\n<p>When we were founding <em>Wall Street Daily<\/em>, IPOs were all the rage. And our readers couldn\u2019t get enough of the latest hot IPO. But now it\u2019s different.<\/p>\n<p>Now it seems like for the investor, it\u2019s a buyer-beware situation. What do you attribute that shift to?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Well, I think they\u2019re right second time, so to speak.<\/p>\n<p>From the company\u2019s point of view, they\u2019ve become more expensive. Sarbanes-Oxley requires CEOs to certify the tech system. And that\u2019s a big risk for the CEOs \u2014 and it\u2019s very costly to do that.<\/p>\n<p>They\u2019re good for institutions because favored institutions get lots of shares of the IPO price.<\/p>\n<p>The bonanza for Wall Street is because there are 5% fees on IPOs \u2014 lots of trading business of fat spreads. Snapchat, for example, traded more than 100% of its IPO on the first day.<\/p>\n<p>For private investors, though, it\u2019s a bit of a snare. If it\u2019s a hot deal, you don\u2019t get much of an allocation \u2014 whereas you do get a big allocation if it\u2019s a rotten deal.<\/p>\n<p>By and large, when you apply for the shares, you don\u2019t know which it\u2019s going to be. If you buy on the first-day pop after the issue, you almost certainly overpay.<\/p>\n<p>For example, Snap traded at $28 on its first day and it\u2019s now back to its issue price of $21 \u2014 and indeed heading below. It\u2019s back below the IPO price even though the market\u2019s up.<\/p>\n<p>There\u2019s often a wave of sellers after the lockout period expires six months after the IPO.<\/p>\n<p><strong>Question:<\/strong> Let\u2019s talk about that first-day pop. I want to take the media to task on this. It\u2019s a pet peeve of mine the way the media report that first-day pop.<\/p>\n<p>They may report a 50% move in the stock price overnight. But what really happens is that stock will have popped 50% before trades really started trading that day.<\/p>\n<p>By the time the market opens to regular people just getting in and out of the stock, it\u2019s already at that peak price. A lot of times lately, it\u2019s straight down from that pop.<\/p>\n<p>Why do the media report it that way? And who\u2019s making all that money before the stock even starts trading regular shares?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> To start with the money, the institutions who are given shares in the IPO who have a long-term relationship with Goldman Sachs or the issuing bank, they\u2019re the people who get shares at the IPO price. And so they make money in the initial pop.<\/p>\n<p>Obviously, the underwriters who keep a lot of shares for themselves also make a bonanza on that initial pop. It\u2019s very, very profitable for Wall Street and Wall Street\u2019s friends.<\/p>\n<p>It does nothing for the individual investor because, as you say, the individual investor can\u2019t buy until the damned thing\u2019s actually opened. He gets very few or no shares in the initial IPO allocation.<\/p>\n<p><strong>Question:<\/strong> So that\u2019s where I don\u2019t believe they should report it as a 50% pop if it\u2019s just the preferred shareholders, the founders, the venture capitalists who are seeing that 50% pop. By the time the market opens, you\u2019re lucky to stay at that price, right?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I think that\u2019s right, absolutely. And particularly as you\u2019ve got a bunch of insider shareholders who have a lockout period of three or six months and then want to sell at the end of that, you\u2019ve generally got a downdraft some months after the issue.<\/p>\n<p>I think individual shareholders should be very careful about buying IPOs particularly until that initial pop.<\/p>\n<p><strong>Question:<\/strong> Might there be an opportunity on the downside of this, then, particularly as the lockout period starts to approach?<\/p>\n<p>Martin Hutchinson: Yes, well, that\u2019s the interesting one. If you wait six months and buy after the end of the lockout period, you\u2019ll generally have a period when there\u2019s been a downdraft on the shares.<\/p>\n<p>For example, Facebook, which was IPO\u2019d at $38, sold in the low $20s six months out when its lockout period expired.<\/p>\n<p>Now, that\u2019s the point at which the IPO can be a very attractive buy indeed. Because you\u2019ve had a couple of quarters of public figures announced after the IPO. You\u2019re not in a period of huge hype for the IPO. They\u2019re not fiddling the books to make the IPO look good.<\/p>\n<p>The insiders who want to sell have sold, and very often if you buy six months after the IPO, you can get a very good deal indeed. Facebook is the obvious example. It sold in the low $20s six months after the IPO and is now trading at about $150.<\/p>\n<p><strong>Question: <\/strong>Martin, it seems to me that the two worthwhile strategies here would be to wait for shares to open to the public and a modest pullback to occur,preferably all the way back to the offer price.<\/p>\n<p>Or maybe our very speculative investors might even want to buy some puts at the top or short the stock. Can you give us the final word on IPOs?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> If you can short the stock or buy puts reasonably cheaply at the top, that\u2019s probably a sensible thing to do. But I suspect the put market will be hugely distorted on that first day of trading, so it\u2019s probably not a realistic strategy.<\/p>\n<p>The really sensible thing to do is watch the IPO calendar like a hawk. Look at the offering documents and all the information that\u2019s produced \u2014 and then wait six months.<\/p>\n<p>Six months later \u2014 if it\u2019s selling at a discount or if there have been some really good earnings announced \u2014 that\u2019s the time to buy. Because then there\u2019s no more downdraft and you may see a big upturn in the long run.<\/p>\n<p><strong>Question:<\/strong> Martin, thanks for your time today.<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Great to be with you.<\/p>\n<p><strong>Question:<\/strong> This is <em>Wall Street Daily<\/em> signing off.<\/p>\n<p>Smart investing,<\/p>\n<p><img decoding=\"async\" class=\"align-none\" src=\"https:\/\/sites.agorafinancial.com\/EMAILS\/images\/signature-martin-hutchinson.jpg\" alt=\"Martin Hutchinson\" \/><\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/05\/22\/ipo-cheat-sheet-june\/\" rel=\"nofollow\">Your IPO \u201cCheat Sheet\u201d for June<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Fake news is killing your ROI. The force awakens in IPOs. Forecasting a hot summer of IPOs. Also recommended: \u201cChurchill\u2019s Ladder\u201d offline tomorrow (1,000% upside). Fake news and political mudslinging is at a fever pitch. Yet there\u2019s an opportunity cost to buying into the Beltway chaos. When truly valid storylines can\u2019t even make [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-106322","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/106322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=106322"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/106322\/revisions"}],"predecessor-version":[{"id":106334,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/106322\/revisions\/106334"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=106322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=106322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=106322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}