IPO Calendar and Penny Stocks……Is there a Trend ?
Playing an IPO offering is just as confusing and challenging as investing in blue chips or penny stocks. Yesterday we saw Hudson Pacific Properties (NYSE:HPP) priced @ $17 and as of right now it is trading to 17.40. Now this was a deal that many people thought would be dead in the water. Prior to this offering, five REITS have done IPO’s this year. All five traded lower on the first day. Does this change the trend of IPO’s trading at a discount on the first day? Probably not. The new issue/secondary calendar tends to get a little thinner in the summer months. So developing any type of trend might be a little difficult. A lot of IPO investors are high risk high reward investors, the same type of investors as people who buy penny stocks. They both have something in common; neither likes to lose money.
So if IPO’s are not priced more favorably for retail investors and institutions, we may see even more deals cancelled or delayed in July and August. Nothing in the market is easy to predict. Nobody has a crystal ball. We are always looking at hot penny stocks and trying to predict the next winner.
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Think an IPO Offering is Safe? Think Again
As many of you may know, the IPO market has been very shaky recently. Some deals have seen penny stock like volatility. We have seen a flood of private equity deals come to the market, and this has turned institutions and retail investors sour on some of the last few offerings. Express Inc. (NYSE:EXP) is a prime example. Express was once a division of The Limited Brand (NYSE:LTD) until a majority stake was taken by Golden Gate Private Equity. As all private equity firms do, Golden Gate cashed in on the IPO.
The once solid Express deal, lost street interest and was priced at $17. This was below the original price talk of $18- $20 that was expected. Today, the stock is trading in the $13 range. As mentioned above, this has cast doubt into future private equity IPO’s and may continue into the near future. Even with companies as established as Express.
The Toys “R” Us IPO could be the next test of this trend. KKR and Bain Capital have large stakes in the $800 million IPO. IPO’s in some regard are like hot penny stocks. They offer the chance of high percentage gains to speculative investors.
Next week’s flagship IPO is CBOE Holdings. Goldman Sachs is the lead manager of the deal. Some IPO services are calling for a $4 premium on the first day of trading. The deal is being priced between $27-$29. As most people know, CBOE like most highly anticipated IPO’s will be as volatile as a high beta gold stock on the first day of trading. Since IPO allocations of CBOE for retail investors will be virtually non-existent, most retail investors will be forced to participate in the aftermarket.
Keep in mind that while the reward is there, the risk is too.
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