IPOs, Initial Public Offerings: pre & post IPO


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Note:  Section 1 is also in each IPO report

Section 1

Pre-IPO grade-score summary
. Many IPOs in today’s environment are graded C+ and scored 7
. If the pre-IPO grade is below C+ or the score is below 7,
then our analysts may have some concerns about the company’s
outlook and/or its market segment
. If the pre-ipo grade is above C+ or the score is above 7,
then our analysts believe the company’s overall business outlook is very favorable,
. C = unprofitable, C+ = profitable

Section 2

Recommendations overview

We have been asked for more nuances in the recommendations, which are: a buy is stronger than a positive+, which means we believe it will be more 'in demand', which means it may have a higher opening pop.

Most buys, positives & neutral pluses have gone up in recent memory.  So in general it’s ok to take stocks that are rated neutral plus.

  • Buy is when companies have good top line revenue, are profitable, have a decent balance sheet (not too leveraged), the P/E seems reasonable, etc.
  • Positive is when their income statement is in uptrend (the most important is top line revenue), the company is generally profitable, and/or they seem underpriced based on compare & contrast metrics.  Or in the case of biopharma the company appears to be a leader in a new segment.
  • Neutral plus means we think the stock will go up on the IPO based on metrics, the market segment (is it a subscription-based, cloud SaaS software company, etc.), the underwriter and in general a feel for the market.

Biopharma’s & Biotechs usually have no earnings and are evaluated using different metrics, including clinical trial stage, market size, competition, cash flow burn rate (negative P/E), price-to-book, etc.

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