So far in 2022, IPO activity has been dominated by small, volatile issuers. Of the year’s 51 pricings to date, 19 (37%) have soared 100% or more in their debuts, while one-in-ten have jumped at least 500%. But those with the largest first-day pops have posted some of the worst losses in the aftermarket.
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We attribute small IPOs' erratic price swings to low floats and momentum trading. We've described this dynamic as "pop-and-drop" trading due to the explosive but often short-lived gains.
Of the 19 IPOs with 100%+ pops, 17 have traded down from the first-day close, and 11 trade below issue. The group averages a dizzying 198% return from offer and a flat return in the aftermarket, driven by two outliers that are up more than 1,000% (HKD and GSUN).
Looking at just the top 10 first-day performers, the average pop is a staggering 686%, though the group has delivered an average -83% loss after the first day.
The 10 IPOs with the largest first-day pops each raised less than $50 million, with a median deal size of just $19 million. The group primarily consists of foreign issuers from Asia or with ties there; just two on the list operate in the US, biotech Blue Water Vaccines (BWV) and medical device developer Tenon Medical (TNON).
Hong Kong-based financial services co. Magic Empire Global (MEGL) leads the group, skyrocketing more than 2,300% on its first day. But despite falling 82% in the aftermarket, the financials company is still trading 343% above offer. Only two others are still currently above issue: Chinese e-commerce services provider WeTrade Group (WETG) and Malaysian e-payment app Treasure Global (TGL).
The remaining deals on the list include Chinese display module supplier Ostin Technology Group (OST), Japanese beauty retailer Yoshitsu (TKLF), Canadian education company Visionary Education Group (VEDU), Singapore-based education company Genius Group (GNS), and Singapore-based cleaning equipment and services provider JE Cleantech (JCSE).