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Screenshot of a breaking news alert e-mail from Q2 2017
The problem trading shares of ‘IPO companies’ in their first few weeks or months of trading is that the market might not have settled on a valuation quite yet, with a healthy balance between buyers and sellers.
That is especially true when the company in question is being valued much more off of future performance than past performance.
And that seems to be in play with newly-public binary options platform provider TechFinancials Inc (LON:TECH).
Friday saw TechFinancials shares trade in a very wide range – starting the day at £0.32, moving up a whopping 33% to as high as £0.43 during the day, before settling back to close at £0.35, rising about 8% on the day overall.
TechFinancials shares are now up 30% from their IPO placing price of £0.27 in the company’s first two weeks of trading.
TechFinancials’ first two weeks of trading. Source: Google Finance.
The latest financial information published by TechFinancials in its IPO prospectus (see link below) covers just up to June 30, 2014. In that last financial period (six months to 30/06/2014) TechFinancials basically broke even, posting a slight $203,000 profit. The company’s underwriters marketed the IPO based on a forward-looking 2015 earnings multiple of about 7.5x, indicating that they forecast net profit of about $4 million this year for TechFinancials. But until the actual results start to pour in, there is likely to continue to be a lot of speculation among traders as to just what those results will be.
For a copy of the TechFinancials IPO prospectus click here.