Tenon Medical, Ostin Technology Shares Rocket in Market Debuts

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Two companies, Ostin Technology Group and Tenon Medical, soared in their market debuts Wednesday. Shares of Ostin, a Chinese supplier of display modules, rocketed about 892%, while shares of medical-device company Tenon jumped 350%. 

Both Ostin and Tenon are trading on the Nasdaq. Ostin’s (ticker: OST) debut was the best first-day pop for an IPO this year, according to Renaissance Capital. The record was previously held by

Yoshitsu

(TKLF), a Japanese beauty retailer that made its debut in January at $4. Its shares surged 700%.

Ostin and Tenon are the latest microcap stocks to launch 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 capitalizations of less than $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.

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

For example,

Genius Group

(GNS), an online education company, soared 408%, to $30.50, in its IPO earlier in April. Since then,

Genius

has lost those gains and closed Wednesday at $6.10, up a dime 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 ended Wednesday at $4.06, off 55%. Then, there is

Yoshitsu

(TKLF), which rose 700% to close at $32 in its Jan. 18 debut, but ended Wednesday at $2.01.

“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 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 292% 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. 

Ostin

(OST) started its groundbreaking day by opening at $10.10. It closed Wednesday at $39.66, up $35.66 from the $4 IPO price.

Late Tuesday, Ostin, of Nanjing, China, raised $13.5 million after selling about 3.38 million shares at the IPO 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 and 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. 

Tenon Medical

(TNON) was the first to open Wednesday. Shares kicked off at $22.05 and ended at $22.50, up $17.50 from the IPO price. 

The strong showing comes after Tenon cut the size of its deal late Tuesday, selling 3.2 million shares priced 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 could be responsible for some cases 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.

Write to Luisa Beltran at [email protected]