Even in this market and this withering economy the IPO market continues to function albeit at diminished capacity. As a programming note you should know that since we have always been a “virtual” company all our staff works from home and so we will be continuing our work every day. The lower volume of deals will allow us to do some deeper sector work and focus more on some of the best recent IPO names to buy once we are the other side of this.
Last week we had two deals price - one biotech and a SPAC. Although there is no active marketing now we have three SPAC deals (two of them are fairly large) that plan to price this month.
Some recent IPO names like Zoom Video (ZM) and Teledoc (TDOC) have been safe havens for investors looking to play the near-term impact of the virus. But many other top-shelf names like Schrodinger (SDGR) have declined enough to make “smart accumulation” a good strategy.
We know it’s not our job here to talk about the market in general but we are lucky to have access to some of the best research out there on where we are now and how we should be thinking about investing. Personally I did live through both the 2000 and 2008/9 markets as an active investor.
The shortest way to sum it up is that we are in a 2008/9 market scenario but with an accelerated schedule. Because investors have “seen that market” the playbook can get executed faster. In that market we had a long series of 5%+ down days. And we can all do the numbers on valuations which are still far above where they were then. It all argues for being patience and taking small steps back into the market over time. We’ll know right about the time to be all in again but as most of the best people we know say - it’s too late to sell but too soon to buy. You have to wait here and watch some of this play out.
Priced Last Week
Imara (IMRA) - This biotech priced at the low end of the $16-18 range and has traded down only slightly to $15.56 which feels like a win in this market. It’s helped by a small deal size ($75M) and fairly low market value ($280M) for an opportunity (sickle cell disease) that is fairly large. Their drug candidate is also a once-a-day oral treatment which is desirable. This one is a good one to have the list to look at a week prior to research coverage.
Scheduled for This Week
Collective Growth (CGRO) - This is a SPAC aimed at the cannabis industry founded by a bunch of former Canopy Growth (CGC) executives. In some respects Canopy Growth is a “success” in the very checkered cannabis industry. They have revenues of ~$300M and a market cap of . However despite their revenue growth the continue to lose prodigious amounts of money. In the December Q Canopy had revenue of $102M but an operating loss of $102M. Gross margin is okay at about 50% but sales and marketing and G&A costs are very high. We’re still looking for a business model in the cannabis space that makes sense to invest in. Maybe Collective Growth will find one and acquire it.
New Filings
There were three new filings last week but none of them appear especially interesting.
The Candyman
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