Four exchanges in the country saw about 77 IPOs (collectively) in 2020. The data for 2021 won’t be definitive until we cross into 2022, but we might see more IPOs, thanks to an aura of recovery permeating the corporate landscape and the stock markets. Still, not every IPO is worth looking into.
Unless you are deeply familiar with the business and the market and anticipate a significant rise, it might not be a great idea to buy an IPO.
But what about after the IPO? You might not have enough financial data or even stock history to make a well-informed decision, but even a few month’s trading data and stock price movements can give you clues about the “mood” of the market. So, even if you are not keen on buying newly listed stocks, it’s a good idea to keep an eye on some of the promising ones. And there are two freshly listed stocks that should be on your radar.
A cannabis stock
Nova Cannabis (TSX:NOVC) came into being due to a merger between YSS Corp, a premier cannabis retailer with about 17 stores, and Alcanna, an Edmonton-based liquor store company. Alcanna spun out its retail cannabis business and pursued a merger with YSS to start a line of premium quality cannabis products at affordable prices.
The newly formed Nova Cannabis operates four brands, one of which retains the name of the original YSS, and another is the new Nova Cannabis brand. The company is focused on the Canadian cannabis market. The size and relatively limited resources of the parent companies indicate a low possibility of an aggressive U.S. expansion to take advantage of the legalization there.
The stock hasn’t performed too badly (yet) since its inception. It started trading for $3.1, saw a sharp decline, and it’s now back to $3 per share again. The current market capitalization is $170 million.
A pet store holding company
Pet Value Holdings (TSX:PET) is a Markham-based company listed on the TSX in the month of June and has been operating in Canada for more than 40 years. It has a market capitalization of about $2.27 billion, and the stock has grown 25% since its inception.
Through various brands, Pet Value offers a broad spectrum of pet products and services. The products include pet foods, accessories, and toys. The services include grooming, washing, adoption, etc. They focus on almost all pet animals, including dogs, cats, fish, birds, and even reptiles.
Thanks to its impressive and well-established presence, you can’t treat Pet Value as other newly listed stocks representing freshly formed companies. And the stock might as well be a massive success as it starts growing more rapidly now that it can raise funds from the market directly. It’s also devoted to animal charities and has a healthy environmental footprint, making it a good choice from an ESG investing perspective.
It’s a good idea to start tracking new companies, ideally before they announce their first earnings result. You can see the initial hype (and how long it continues) and investor behaviour after earnings results are made public. This might allow you to anticipate and take advantage of any sharp rises and selling at the dip if you bought the IPO.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.