Have you been WISHing for a big unicorn for the holidays and you came away empty handed
last week? Today we’ll take a look to see if e-commerce platform Wish could be that
bargain unicorn IPO you’re looking for. And I have a couple of other big news items
to report on; one is a very popular company with a lock up expiration coming up…and
the other is breaking news on Roblox and their pursuit to go public...this is one episode
of IPO This Week you won’t want to miss!
Welcome to IPO This Week for the week of December 14th, 2020. Today, as we do every week, we’ll
take a look at the IPOs for the coming week. As we head into the middle of December, confirmed
IPOs have slowed, in fact, as of this recording over the weekend, I only have 4 that I’m
confident of launching this week, although I could see some added to the calendar for
later in the week..and if that happens, I’ll give you guys an update. For today, I’ll
give you overviews on the 3 smaller companies going public, one that I think could be one
flying under the radar, and one that really isn’t an IPO, I’ll explain why when we
get to that one. We’ll also take a more in-depth look at Wish, which was one of the
5 big unicorns we were expecting to IPO before the end of the year. Last week, as you know,
the first 2 came out, with those being Airbnb and DoorDash, and both of those traded much
higher, okay insanely higher, than their IPO price. We’ll see if Wish will follow suit
and I’ll give some of my own thoughts on what might happen. And then another one of
those 5 unicorns was Roblox, and the big news that hit at the end of the week is that they
are delaying their IPO until early next year, I’ll share the reasons why that decision
was made. And, as always, we’ll talk about lock up expiration dates, and we have a big
one this week…I won’t make you wait and tell you upfront it’s Snowflake; I’ll
give you the details later. This in one episode I would recommend you not clicking away from.
But before we get into all of that, I just wanted to thank everyone who was able to join
the live stream last week, I can’t tell you how much I enjoy the interaction, although
it’s a little nerve-wracking for me because you never know what to expect. I am looking
at doing some more in the future and will try moving the times around because I know
we have people all of the world watching the channel and I’d like everyone to have an
opportunity to join one. And one other thing that you may have noticed…our community
hit 10,000 subscribers last week. I can’t even begin to tell you how amazed I am at
how the channel has grown and it’s done that because of all of you. I just want to
thank you guys so much for all of your support, the comments, pushing the like button, and
of course subscribing to the channel and going along with me for the ride. I have some plans
to further grow the channel as we head into the new year, I’ll being sharing those in
the weeks to come. Alright, let’s get into the slate of companies
coming out this week. I’ll start with overviews of the 3 smaller companies before we get to
Wish. The first one is an oncology biotech named BioAtla, ticker BCAB. This biotech is
developing a class of therapeutic candidates to exploit characteristic pH differences between
the tumor microenvironment and healthy tissue. According to the company, unlike healthy tissue,
the tumor microenvironment is acidic, and they have designed antibodies to selectively
bind to their targets on tumor cells under acidic pH conditions but not on targets in
normal tissues. Their approach is to identify the necessary targeting and potency required
for cancer cell destruction, while aiming to eliminate or greatly reduce on-target,
off-tumor toxicity—one of the fundamental challenges of existing cancer therapies. At
this point they have two candidates currently in Phase 2 trials for multiple cancer indications,
with interim data expected in 2021. We’ve talked about biotechs a lot on the channel,
and again, it’s important to remember that it could take years for these candidates to
make it to the market, and that’s only if they are proven to be successful, which there
isn’t a guarantee, so you’re definitely looking to the future here. But if you are
interested, the company looks to price on Tuesday between $15 to $17 dollars and then
should start trading on Wednesday. Next up we have a Lending platform company
named Upstart, ticker symbol UPST. This company could easily gather interest from investors
due to its focus on using artificial intelligence technologies to better predict credit risk
by using a cloud-based artificial intelligence lending platform; Upstart could end up being
the best of the bunch coming out this week from an investing perspective. According to
Upstart, consumers on the platform benefit from higher approval rates, lower interest
rates, and a highly automated, efficient, all-digital experience. And then their bank
partners benefit from having access to new customers, lower fraud and loss rates, and
increased automation throughout the lending process. Since their inception in 2012, Upstart’s
bank partners have originated over 620,000 personal loans that have generated more than
9 million repayment events. In the nine months ended September 30, 2020, approximately 70%
of Upstart-powered loans were entirely automated. Their revenue is primarily comprised of fees
paid by banks. Some of those fees include referral fees for each loan referred through
Upstart.com and originated by a bank partner, platform fees for each loan originated regardless
of its source and then loan servicing fees as consumers repay their loans.
As far as growth, the number of loans facilitated increased by 88% from 2018 to 2019, and 30%
from the nine months ended September 30, 2019 to the same period in 2020. Revenue for the
nine months ended September 30, grew 44% from 2019 and 2020 to a total of $146.7 million.
Also, for the nine months ended September 30, 2019 and 2020, they improved from a net
loss of $6.5 million to net income of $5.0 million. While the growth has been strong,
one thing to keep in mind as reason for caution is that one community bank in New Jersey named
Cross River Bank originated 89% of loans facilitated on the platform for fiscal year 2019 and 72%
of all loans in the first 9 months of this year, and much of the remaining loans came
from one other partner…they definitely need to diversify the number of partners going
forward. As far as the IPO itself, they look to price on Tuesday within a range of $20
to $22. Public trading would then begin on Wednesday the 16th.
Next up is Midwest Holding. Upfront this is really not an IPO, but a company that is stepping
up from being available Over the Counter to being listed in the Nasdaq. I’ve included
it because, #1. it’s a light week and #2, because a lot of people use brokerages that
don’t have access to Over the Counter Stocks. Because it’s not a true IPO, I’m not gonna
talk too much about them, but I will tell you that the company Underwrites and markets
life insurance products in the US, if this is an area you’re interested in. Basically
they utilize their technology platform to develop and distribute what they believe to
be competitive insurance products through third-party independent marketing organizations.
If this is this a company you’re interested in, and because they are already available
publicly, you can search their ticker MDWT and easily find more information on them.
Again, not a company we would normally talk about here, but I added it just to give us
another company to talk about in a light week. They look to start trading on trading after
being listed on Nasdaq on Thursday within a range of $70 to $74.
Before we get to Wish, let’s talk about the breaking news on Roblox. This was one
of those 5 big unicorns that we talked about having an IPO before the end of the year.
Well as I always say, IPO dates are fluid and this is a prime example of that. We just
learned that the company has decided to delay their IPO until early next year. The reason…well….Airbnb
and DoorDash. If you’re wondering what those companies would have to do with Roblox, well
it’s less about those companies and more with IPO pricing relative to how it traded.
As we all saw last week, both companies priced at one number and then opened up trading at
a much higher number. Looking at Airbnb specifically, they priced at $68, but trading opened up
at more than double that price at $146. From one point of view, the IPO looks wildly successful…it
shows demand was strong, and if you’re an institutional investor that bought shares
at $68, you’re really happy at that performance. However, if you’re Airbnb itself, you’re
not so happy. Why? Because as we’ve talked about this before on the channel, when an
IPO trades higher than it’s priced, the company can feel like money was left on the
table, because they sold their shares at $68 and that’s all they get. They aren’t getting
that $146 per share, that’s only where it’s trading. If Airbnb thought that the stock
would trade at those levels, then they could’ve priced their shares at say double of $68 which
would be $136, and they would have raised double the money and the stock would have
still been seen as successful to the general investing public because it traded over that
price. Now it’s not that simple, because the institutional investors may not have bought
the shares at that price of $136, so it’s a delicate balance of the company, in this
case Airbnb working with their underwriters to get the best price they can, but at a price
that institutional investors will still pay. Based on what we saw last week, the demand
in the IPO for both of those companies could’ve and should’ve netted more for Airbnb and
DoorDash themselves. Again, it’s not as simple as it sounds because institutions may
not think Airbnb is worth what people are trading the shares, so they may not have bought
all of the shares if they were priced at $136, but there definitely was an opportunity for
Airbnb to have made more money. And that’s what Roblox is looking at and is the reason
for the delay. At this point, they’re having difficulty in determining a price for their
IPO shares that ensures they get maximal return on their shares, while also ensuring demand
is strong. Needless to say, Roblox was probably looking to come out this week before the holidays,
but couldn’t fit it in with being unsure on how to price its shares with the holidays
looming to end out the year. So right now all indications are that this is only a slight
delay, meaning nothing has changed structurally for the company that would put the IPO itself
in jeopardy. I know there’s a lot of interest from many of you in the community, it probably
feels like ordering a gift for Christmas that doesn’t arrive on time…you know it’s
still coming, but it’s a little disappointing. As I have more clarity on when the IPO will
happen, I’ll keep everyone posted. Okay, now to the big one actually coming out
this week, Wish. For those of you not familiar with the company, it’s a global ecommerce
platform based in California and filed under their parent company’s name, ContextLogic.
The company was founded in 2010 to focus on a platform of China-based merchants, and while
they have expanded that reach to more countries, most of their merchants are still based in
China. The platform connects more than 100 million monthly active users in over 100 countries
to over 500,000 merchants offering approximately 150 million items. Many of their items include
unbranded merchandise at bargain prices. So right now, I’m sure many of you are thinking
of Alibaba as a competitor, and you would be right on with that assumption. Some other
companies Wish sees as competitors include Amazon and Shopify. And they also consider
discount retailers like Walmart and Target as part of their competition as well. One
of the things that sets Wish apart from many of their competitors is that their platform
was built for mobile users, meaning they didn’t have to adapt an existing PC platform for
a mobile experience unlikely a lot of other companies had to do. And that focus has been
demonstrated in the data in that around 80% of its sales come from mobile devices.
Based on a market research report Wish cited in their filing, Global ecommerce was a $3.4
trillion market in 2019 and is expected to nearly double that and reach $6.3 trillion
by 2024. And within ecommerce, mobile, which is where Wish’s focus is, consisted of 63%
of global ecommerce in 2019, a number that is expected to grow to 71% by 2024.
So how are they doing right now? As far as revenue, the company gives us a longer time
frame of looking back than most do with their IPO filings. As you can see going back to
2015, revenue has grown at a pretty good rate and pretty consistent. In fact, more recently,
from 2017 to 2019, revenue had a compound annual growth rate of 31%. And as you can
expect, with the type of business they run, they’ve thrived in the pandemic environment
with revenue rising 32% year over year when looking at the first nine months of 2020.
As far as net income or loss, you can see that they’ve not been profitable for any
year reported, but they also have not had any full years of being profitable going back
to their inception. As far as some key metrics to look at, we
have monthly active users, as well as the date for Active Buyers in the last 12 months,
which you can see on the screen. Excluding some blips, overall numbers have grown positively
from year to year in both metrics. As to the IPO itself, it looks to be priced
on Tuesday within a range of $22 to $24. The stock will then start to trade under the ticker
WISH on Wednesday the 16th. After the craziness of last week, the question is where do we
think this one will trade? Even with the demand in IPOs, I’m gonna go a little out on the
limb here and say I don’t expect this company to trade anywhere near as hot as Airbnb and
DoorDash did. The company’s rate of growth did slow a little bit in 2019, it’s pretty
unprofitable, and has more competition from bigger names companies. Plus I just don’t
see the general brand awareness and interest from the retail investors that both Airbnb
and DoorDash has. As you know, I make no claims to predicting the future and I just stating
my thoughts here and am not making any recommendations either way. I’m not saying it’s a bad
company to invest in, I just simply don’t see it having the demand that last week’s
companies had. And if you like Wish that may be a good thing, because then you might get
that stock at a price that makes more sense, whereas you might’ve got shut out on DoorDash
and Airbnb. But we’ll see. What do you think about Wish? Let me know in the comments.
Moving on, as well always do, let’s talk a little bit about companies with locked up
shares expiring. This week we have quite a few. First we have Royalty Pharma (RPRX)on
12/13. Then we have JFrog (FROG) and Snowflake (SNOW) on Tuesday the 15th. You might be thinking
that both companies are still within the typical 180 days that lock ups are usually set for,
but both companies had guidance in their filings for earlier expirations with about 25% of
locked up shares becoming tradeable. Because this is only a percentage of all of the locked
up shares, there may not be as much as a move of the stock as if all were being released
as the same time, but it’s something we’ll keep an eye on, as there could be some downside
pressure on the share price, and if you’re looking for a better entry, this might be
an opportunity. We’ll have to see how it shakes out, particularly since both Snowflake
and JFrog are down from their all time highs already. Moving on with other companies with
locked up shares expiring, for Wednesday we have Forma Therapeutics (FMTX), Genetron Holdings
(GTH), NuZee (NUZE), and Repare Therapeutics (RPTX). And then on Thursday, Progenity (PROG)
finishes up this week’s list. We also have a couple of notable quiet periods ending,
one for Neogames (NGMS) on Monday and then Maravai Life Sciences (MRVI) on Tuesday.
Once again, there you have it, another episode of IPO This Week in the books. And I think
it was a pretty interesting one even though there were only a few new companies coming
out this week to cover. If you enjoyed the video and want to see more videos like this,
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subscribe button. And with that, I’ll wish you a good week of trading….thank you for
watching, and until next time, have a great day!