After a slow start to the year, IPO activity has begun to pick up in the second-quarter, with 43 IPOs having been launched since April 19. Of those, just 12 have declined in the days and weeks since, while the other 31 have posted gains, many of which have been impressive; nine of the IPOs issued since April 19 have posted gains of at least 60%.
In this article we’ll take a look at three IPOs that have been issued since June 14 which immediately gained the support of some of the company’s insiders. Insider buying activity is always a positive indicator for any stock, ensuring that a company’s management team is aligned with shareholders, and that they believe in the future successful performance of shares.
Alongside our tracking of insider trading activity, we also track the top consensus picks of the best performing hedge funds each quarter. This “Best Performing Hedge Funds Strategy” gained 4% last quarter vs. a loss of 1% for the S&P 500 ETF (SPY), and a further 7.6% so far in the second-quarter compared to a 0.9% loss for the SPY. Since its inception in May 2014 this strategy’s picks have returned 87.8% vs. 53.3% for the SPY. You can see our latest picks by trying our newsletters free of charge for 14 days.
i3 Verticals Inc (NASDAQ:IIIV)
Who Bought Shares: General Counsel and Secretary Paul Maple
How Many Shares Were Bought: 5,769 @ $13.00 per class A share
Date of the Transaction(s): June 25
In addition to the i3 insider’s recent purchase, he also owns 27,894 class B voting shares, which were converted from his equity ownership in the company prior to the IPO.
i3 Verticals Inc (NASDAQ:IIIV) is the newest of the IPOs discussed in this article, going public on June 21. Shares have already jumped by over 20% from the IPO price of $13.00, and had actually topped 40% gains on their first day before giving back half of those gains since.
i3 provides integrated software and payments solutions for small- and medium-sized businesses in the healthcare, education, and property management verticals, among others. The company processed $10.3 billion in payments last year, which represents the bulk of its revenue generation, and has grown at a compound annual rate of 67% over the past four years, including a 27% rate last year. Since its inception in 2012, i3 Verticals has made nine platform acquisitions and 12 tuck-in acquisitions, and the company expects to continue to search for and find attractive acquisition targets in the coming years.
On the next page we’ll look at two other recent IPOs with insider buying action.
Charah Solutions Inc (NYSE:CHRA)
No less than five Directors of Charah Solutions’ board purchased shares on June 18 for the IPO price of $12.00 per share. Among them were Brian Ferraioli (8,350 shares), Stephen Tritch (1,000 shares), Robert Flexon (5,000 shares), Jack Blossman (5,000 shares), and Claire Babineaux-Fontenot (2,500 shares).
Charah Solutions Inc (NYSE:CHRA) is one of the few IPOs that hasn’t captivated investors since its launch, sliding from its $12 IPO price (which was already well below the $16-$18 expected range) down to $11.11 per share. That’s not entirely surprising given that the company provides environmental and maintenance services to two hard-hit energy segments, coal and nuclear, which have been supplanted by cheaper forms of energy generation like natural gas, solar, and wind.
President Trump recently issued an order to Energy Secretary Rick Perry to bail out the beleaguered power plants, citing national security concerns, which increasingly appears to be his go-to method to justify whatever he needs to get done. The order will force electric grid operators to buy the more expensive energy from coal and nuclear plants.
While that may buy those plants a temporary reprieve, it’s likely to be just that, temporary. Given that Charah Solutions Inc (NYSE:CHRA) is heavily exposed to both coal and nuclear, its long-term prospects don’t exactly look rosy. The company is also in a debt covenant straightjacket that prevents it from paying dividends or buying back stock, which eliminates two of the easiest methods by which companies can reward shareholders.
Avalara Inc (NYSE:AVLR)
Avalara’s Chairman, CEO, and President Scott McFarlane, as well Director Jared Vogt, both of whom are members of MVPROJECTS, LLC, were credited with purchasing 9,375 Avalara Inc (NYSE:AVLR) shares at $17.68 per share on May 29, with those shares being indirectly owned by both insiders. In addition, the Director has direct ownership of 1.11 million shares, while Avalara’s top executive owns 697,488 shares directly.
Avalara Inc (NYSE:AVLR) has nearly doubled from its $24 IPO price since June 15, sitting just under $48 per share. The provider of tax compliance software enjoyed a positive catalyst early in its publicly-traded life, as the Supreme Court ruled on June 21 that states will be allowed to continue to collect sales tax on online purchases, regardless of where the physical location of the online retailer in question. That means a lot more transactions that Avalara’s cloud service could be called upon by online sellers to determine the proper amount of tax to be charged, which is a complex process. Avalara’s revenue rose by 27% last year to $213.2 million as it processed 6 billion transactions. CEO McFarlane has the ambitious goal of one day having a hand in every digital transaction.