Hebe Chen, Melbourne-based market analyst at IG Markets Ltd, says she expects more such deals in the coming months. “Before the door fully closes, investors and institutions, especially those with a high-risk appetite, are trying to squeeze into the market as opportunities may evaporate anytime,” she said.
Some of these other deals run by other brokers have also seen eye-popping increases. For example, Hong Kong-based financial services firm AMTD Digital Inc., whose IPO was underwritten by a related entity, was bigger than Goldman Sachs by market value at close on Aug. 2.
While the string of first-day pops illustrate the reach of this year’s unusual price action, it’s sometimes just the start of the wild price swings.
AMTD Digital, for example, is continuing to experience sessions with extreme price spikes in the weeks after its debut. Shares were down 31% premarket in New York on Tuesday after surging as much as 204% last Wednesday.
Such huge price swings could be related to low liquidity, Justin Tang, head of Asian research at United First Partners in Singapore, especially when companies have made sure to leave something on the table for subscribers to IPOs.
“Big moves happen when other investors want in on the move and yet cannot get enough supply,” Tang said. “The same supply-demand imbalance shows up when investors want to cash out, yet there are insufficient buyers at a certain price.”
The US Securities and Exchange Commission in August said it is monitoring the unusual moves in microcap IPOs without naming any firms. The SEC declined to comment on whether it is assessing any of the Network 1 deals.
“These are scary stocks,” Erik Gordon, professor at the University of Michigan’s Ross School of Business in Ann Arbor, Michigan, told Bloomberg last week, speaking about small IPO stocks in general. “Professionals won’t get near them they’re so scary. It’s easy to get those big price spikes, but they’re not sustainable.”
--With assistance from Lydia Beyoud, Sophia Tian, Olivia Poh, Zheng Li, Matt Turner, Bailey Lipschultz, Yiqin Shen, Filipe Pacheco and John Cheng.
This article was provided by Bloomberg News.