Tenon Medical, Ostin Technology Shares Rocket Higher in Market Debuts

The two companies are the latest microcap stocks to hit the market for initial public offerings. Microcap listings are a subset of the IPO market, which has been on hold this year. Just 24 traditional IPOs have raised $2.6 billion so far this year, an 81% drop in the number of deals, according to Renaissance Capital. At least a dozen microcap companies have listed their shares this year. 

The term “microcap” typically refers to companies with a market capitalization below $250 million to $300 million, according to the Securities and Exchange Commission. Microcap companies are considered risky because they are new, often have no proven record and because many trade in low volumes, any size of trade can have a large percentage impact on the price of the stock, the SEC said. 

While Ostin and Tenon do have a low share offering, it is unclear whether they are also “low-float,” according to Matt Kennedy, senior IPO strategist at Renaissance Capital. Both IPOs have lockup agreements that don’t cover all shareholders, which means additional stock could hit the market, Kennedy said in an email. The interest in “low-float, microcap” deals did help these two companies price their deals, Kennedy said. 

Low float, microcap stocks are sometimes subject to wild swings. Traders will pile in expecting a pop, Kennedy said. The stocks will often lose those gains the longer they trade.

For example,

Genius Group

(ticker: GNS), an online education company, soared 408%, to $30.50, in its market debut earlier in April.

Genius

has lost those gains and traded at $5.91 Wednesday, down 9 cents from its $6 offer price.

Blue Water Vaccines (BWV), a biotech, was considered a standout IPO from the first quarter, when it rose about 540% from its $9 IPO price in February. Blue Water’s stock changed hands at $4 Wednesday, off 55%. Then, there is

Yoshitsu

(TKLF), a Japanese beauty retailer that made its debut in January at $4. Its shares rocketed 700% at first, but Yoshitsu is now trading at $1.92. 

“Eventually these stocks need to trade on their fundamentals,” Kennedy said. 

Such big pops can be misleading for retail investors since most can’t buy these IPO stocks at their IPO price, he said. “This is something that many people still don’t understand,” Kennedy said.

Investors may see the huge gains and not realize that the returns available on the open market for retail are much lower. For example, investors that bought into Ostin at its open price of $10.10, would only see a gain of 138% if they sold immediately. Many times those gains will often disappear as the stock continues trading. “In the long run, people would be better off avoiding these companies especially at the first day price,” Kennedy said. 

Tenon Medical

(TNON) was the first to open Wednesday. Shares kicked off at $22.05 and recently changed hands at $24, up $19 from their IPO price. 

The strong showing comes after Tenon cut the size of its deal late Tuesday, selling 3.2 million shares at $5 each. It had planned on offering 4 million shares at $4.50 to $5.50 each, a prospectus said. 

The Benchmark Company and Valuable Capital were lead underwriters on the deal. 

Formed in 2012, Tenon has developed a surgical implant system to treat chronic sacroiliac joint pain, which is believed responsible for 15% to 30% of lower back pain. The Food and Drug Administration has approved the company’s Catamaran SIJ Fusion System, which fuses one or both sacroiliac joints to treat SI-Joint dysfunction. Tenon said the potential annual market for surgical intervention of the SI-Joint is more than $2.2 billion. It plans to commercially launch the Catamaran system, the prospectus said. 

Ostin

(OST) also jumped in its market debut. The stock opened at $10.10 and recently traded at $23, up $19. 

Ostin, of Nanjing, China, raised $13.5 million after selling about 3.38 million shares at $4 each, a statement said. Prime Number Capital and Shengang Securities are lead underwriters on the deal.

Founded in 2010, Ostin designs, develops and makes TFT-LCD display modules that are mainly used in consumer electronics, outdoor LCD displays and automotive displays. Ostin also makes polarizers that are used in the TFT-LCD display modules, a prospectus said.

Ostin is profitable, reporting $3.3 million in income for its fiscal year ended Sept. 30, compared with $2.8 million in 2020. Revenue rose about 20% to $167.7 million, the prospectus said. 

Write to Luisa Beltran at luisa.beltran@dowjones.com