Today, we’re talking about IPOs coming out the week of August 10th. If you like hearing
about all of the upcoming IPOs every week, you’ve come to the right place. Plus, I
also have some interesting news from Rocket Companies on their IPO last week that updates
last week’s video including some of my own personal post-IPO thoughts on the company.
Welcome to Healthy, Wealthy, and Wise and our weekly feature, IPO This Week where we
cover all of the companies going public, as well as the lockup and notable quiet period
expirations. I’d like to welcome back our subscribers…and after the popularity of
the in-depth analysis video on Rocket Companies last week, we have a lot more…so I want
to thank everyone for supporting the channel and coming back this week. And for anyone
new here that likes to keep up to date on the latest IPO information, we’d love to
have you join the community as well, and you just do that by simply pushing that subscribe
button…it’s so easy and so free. But if you need to be convinced, feel free to watch
on and I’ll check back with you at the end of the video. And for anyone that has been
following Rocket’s transition to a publicly traded company, I’ll share some significant
news that came right from the CEO’s mouth in just a few minutes plus I will add some
of my own personal thoughts. But since most of you are here to hear about new IPOs launching,
let’s start there. So after a busy last week of IPOs, we catch
our breath a little this week, because as of right now, we only have 3 companies scheduled
at the time of this recording…I actually waited a little longer to record it to see
if there would be anyone else added the calendar, but there wasn’t, so this is it! So we definitely
have some time to talk more about Rocket’s IPO in this video. And also, just a quick
reminder that while this video is meant to be informative, it should not be seen as a
recommendation for you to take any action on the companies covered—you should always
do your own research or consult with your own financial advisor when making any investment
decision. So with that, first up is the biggest offering
by market cap, and that is KE Holdings (BEKE), China's largest online housing platform who
plans to raise $1.9 billion at a $20.7 billion market cap. The company was founded in 2001
and its platform has grown to include over 260 real estate brokerage brands, 42,000 community-centric
stores, and 456,000 agents across 103 cities in China as of June 30th of this year. KE
looks to grow its business through catering to both service providers and agents as well
as to end user customers. The company is divided into two divisions,
one that focuses on online and offline housing transactions and services and the other that
is a dedicated residential real estate brokerage. KE utilizes what it calls its Agent Cooperation
Network or ACN, which is similar to the US’s Multiple Listing Service, more commonly referred
to as the MLS. The ACN shares i’s information with it’s almost half a million agents and
other service providers. According to a 2019 market research report
by IBIS World, the real estate agent market in China reached total revenue of $32 billion
in 2019, growing at an annual growth rate of 5.2% between 2014 and 2019 with the growth
attributed to the large population of the country, the accelerating urbanization process,
rising household disposable income , and overall continued economic growth.
Some of the company’s investors include Softbank and Tencent; you may be familiar
with Tencent who has been in the news recently as the Chinese company that owns the popular
WeChat app which was recently targeted by executive orders that ban any U.S. transactions
with the company. As for the company’s financials, they indicate
that revenue growth has been strong, their gross margin is increasing and that they been
profitable in the first half of 2020. The company plans to use the net proceeds
from the IPO for further growing the business with 30% going to research and development,
another 30% towards expansion of their new home transaction services; 25% for diversification
of their service offerings and expansion of business operations into new geographical
areas; and with the remaining balance for general corporate purposes.
As we discussed on the analysis video on Li Auto that I released last month, like many
Chinese companies entering the US markets, they use a Variable Interest Entity structure
which means that US investors would only have an interest in an offshore firm with contractual
rights to the firm’s operational results but would not own the underlying assets. Just
something to be aware of as there are legal differences as compared to owning a US company’s
shares. The IPO is set for Wednesday with a proposed pricing range of $17-$19 with trading
expected to begin on Thursday.
Let’s stay with real estate and go to our next IPO, NetSTREIT (NTST), a real estate
investment trust, more commonly referred to as a REIT. This REIT focuses on managing single
tenant retail commercial properties and plans to raise $310 million at a $554 million market
cap. NetSTREIT plans to offer a 4% yield or dividend at the midpoint of its proposed price
range of $19-$21. The company’s portfolio includes 163 single-tenant retail net leased
properties spanning 34 states, and its tenants include familiar brands such as 7Eleven, Walmart,
and CVS. One of those things that always catches my
eye is when all of the proceeds of the IPO will be going to the pre-IPO shareholders
with nothing going towards investments into the growth of the company; that’s something
that always gives me pause; and that’s what NetSTREIT is doing with this IPO. And also
considering there’s a whole lot of uncertainty with commercial real estate in the current
pandemic era, this is one that you really want to look a lot further into before jumping
in. If you are interested in it, the IPO is anticipated to happen on Wednesday with trading
expected to begin on Thursday.
And last up is a company that may end up being the most interesting because of some tech
credentials and that is Duck Creek Technologies (DCT), which provides a platform for Property
and Casualty insurers to improve their operational efficiencies for policy administration, claims
management and billing functions. The company has some well-known names as customers,
names that include Progressive, Liberty Mutual, AIG, The Hartford, and Geico.
According to a 2019 market research report by Mordor Intelligence, the global market
for Insurtech software and services is expected to grow from $5.5 billion in 2019 to $10.14
billion in 2025. This represents a forecasted Compound Annual Growth Rate of 10.8% from
2019 to 2025 with the reasons cited as the need to increase efficiencies through automation
as well as improved technological offerings. One of their main competitors includes Lemonade
who also went public this summer, and as you may recall, they did so with success.
Duck Creek’s recent financial results show that the company is profitable on an EBITDA
basis, has growing topline revenue but with a reduced gross margin.
The company is looking to raise $300 million with their IPO with pricing expected to be
between $19-$21. As of today we expect the IPO to occur on Thursday the 13th with trading
beginning on Friday. Okay so there you have this week’s IPOs.
While there is not a big, well-known name on the slate, you never know if one of these
companies can take off and become that big name you hope to get in on early. Speaking
of big names, let’s revisit Rocket Companies who had their IPO last week. But before I
do, I want to ask you to please hit that ‘like’ button to let me know you are enjoying this
video—it’s more important than you might think as it helps me grow the channel as well
it lets me know that videos like these are what you want to see; plus it’s always nice
to feel that the time I spend on making these videos is worth it to you.
Alright, back to Rocket..you’ll recall in the analysis video that I released last week
I said that the company did not plan to offer a dividend. I said that because it was clearly
in the registration statement; you can see an excerpt from the filing shown on your screen,
with the first sentence stating, “we have no current plans to pay dividends on our class
A common stock”. Well, on Thursday when the stock started trading, surprise, surprise,
the company’s CEO Jay Farner gave an interview on CNBC saying that due to the strong year
they were having, that that may offer a dividend to shareholders. That definitely caught a
lot of people’s attention, including mine. My first thought was that this might have
been a way to combat the potential negative sentiment coming from the fallout of the downsized
IPO. Again, just my opinion, and I could be wrong, but it just seemed to come out of the
blue, as it was in such stark contrast to the black and white guidance in the recent
S-1 filing. Offering a dividend would definitely create some more enthusiasm for investors
considering the stock, so I feel like that is why he may have floated the idea. And he
did use the word ‘may’ so we’ll see if it actually happens. But whatever the reason
for the change in course from the filing, a possibility of a dividend is a positive
for the stock if it comes to pass. Some other thoughts I had were based on the
reaction by the underwriters and institutional investors that resulted in offering 50 million
less shares at a lower price than what was anticipated. Now in the grand scheme of things,
they still raised 1.8 billion dollars, so I don’t think you can call it a failure,
but they did raise over 1 billion less than they expected so I think it’s fair to say
the IPO disappointed. But, for the average investor that really believes in the company,
that’s actually a good thing for you! Are you thinking, ‘why would you say that Kevin?
Well I say it because with 50 million less shares floating around out there, that makes
each of your shares a little more valuable since more shares in the market would dilute
the value of each share. So that was one good thing for everyday investors, but there was
another positive thing, and that was when trading started, unlike some of the crazy
IPOs that triple out of the gate before even one share sells, Rocket’s shares could initially
be had under the IPO price of $18 dollars, before ending the day and then the week with
some significant gains. I just think the news of the downsized IPO weighed on some minds
at the open of trading which helped keep the shares at a more attractive price than if
they were coming off of news of an upsized IPO which potentially could’ve driven the
price much higher at open. So there really is a lot of nuances with IPOs and I know a
lot of people just look at them to see what happens on that first day, but I tend to look
at them as a race with different legs, like a triathlon or a 4X100 relay race. So for
the first leg there is the opportunity to review the S-1 filing…or get some of the
highlights from the latest episode of IPO This Week. Then there is the actual IPO that
happens before public trading that most of us average investors aren’t able to participate
in, but we can still learn some details from. Then of course, there is that first day of
trading which is where most of the focus is. But then you also have the lead up and the
aftermath of the expiration dates for both the quiet and lockup periods. This is why
I also cover those on this weekly show. For some of you newer to the channel, if you’re
looking for more information on the lockup and quiet periods, I have a video detailing
the IPO process and how I applied it to Albertsons Companies which IPO’d earlier this summer
and it covers these topics, so definitely check it out…I’ll link it for you. And
I guess that is the perfect segue into sharing this week’s expiration dates. Up first we
have the lockup period for:
Huize (HUIZ) ending on 8/10
On August 11,th we have
Houlihan Lokey (HLI) Revolution Medicines (RVMD)
Trxade Group (MEDS)
And then on August 12th, we have Muscle Maker (GRIL)
Duos Technologies (DUOT)
And finally we have quiet period for: GoHealth (GOCO) ending on 8/10
So there you have it…3 new companies to consider investing in and more insight on
the big IPO from last week. If you see something that needs updated from the time I recorded
the video, please feel free to add it in the comments in order to update our community,
I’ll do that as well as I want my subscribers to get the most up to date information. And
if you’re new here and were waiting to be convinced to subscribe to the channel, I hope
I did that and you’ve decided to join the community; we’d love to have you onboard.
And to everyone, please remember to like the video and share the link with others; afterall,
I hope that we can all learn from each other on how to take little, easy steps in making
big improvements in our lives. Thank you for watching and until next time, have a great
day!