Looking to buy an IPO? With Sofi Active Invest you can participate in the next IPOs before they trade on the stock exchange.
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Under normal circumstances, average residential real estate transactions involve considerable give-and-take. Since a house is usually an individual’s or a family’s biggest purchase, they want to be absolutely confident before signing their names on the dotted line. Thus, careful inspections and the unexpected have long been an integral part of the negotiation process.
However, the post-COVID-19 era has not only imposed new paradigms in healthcare and crisis management, it has triggered profound economic changes that could potentially reshape the business landscape. One of the most dramatic changes has occurred in the housing market, with buyers rushing to take advantage of lower interest rates as the Federal Reserve pulls all monetary levers to keep the US economic machine afloat .
Naturally, the voracious demand for real estate also presents extraordinary opportunities for downwind industries, especially businesses related to home improvement. While the unprecedented seller’s market allows quoting parties to charge ridiculous premiums, a little effort can go a long way in this environment. Therefore, the next public offering (IPO) of FGI Industries Ltd., a supplier of kitchen and bathroom products, could pleasantly surprise speculators.
How to buy FGI Industries IPO (FGI) shares
Interested FGI investors must acquire stocks short, which requires knowing how to buy stocks. Below is a quick guide.
Step 1: Choose a brokerage house.
As the best brokers compete against each other on similar financial incentives, focus more on the platforms that best suit your needs.
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Step 2: Decide how many shares you want.
Every IPO comes with risk, especially the nano-cap variety. Therefore, choose a balanced number of shares.
Step 3: Choose your order type.
Before you trade, learn these market concepts.
- Bid: Buyer’s best offer for a stock.
- Ask: The lowest acceptable price from the seller.
- Propagated: The difference between the bid price and the ask price, the spread indicates the market risk because it is also the profit margin of the market makers.
- Limited order: Requests to buy or sell at a predetermined price, limit orders offer transparency but no guarantee of execution.
- Market order: Market orders guarantee execution, but only at the prevailing rate.
- Stop-loss order: Stop-loss orders automatically exit your position at a predetermined price or lower.
- Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry the risk of non-execution.
Step 4: Execute your transaction.
Follow these steps to execute a market order:
- Select your type of action (buy or sell).
- Enter the stocks you want to buy (or sell).
- Press the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
What is FGI Industries?
Founded in 1987, FGI Industries, based in East Hanover, New Jersey, supplies kitchen and bathroom products to a global customer base. His specialty focuses on sanitation related products such as sinks, pedestals and toilet seats. In addition, the company has built a reputation for bathroom furniture, shower systems and kitchen cabinets.
FGI generates revenue through mass retail centers, e-commerce platforms, specialty stores, and wholesale and commercial distributors. At the end of 2021, FGI reported employing 130 people, making it one of the smallest new listings to honor the IPO schedule in recent memory.
What is the IPO date of FGI Industries?
Scheduled to debut on the public market on Jan. 13, FGI Industries is one of a number of companies proving that while they have yet to complete two full weeks in the new year, the appetite for IPOs remains voracious.
With plans to distribute 2.5 million shares, FGI has provided an estimated price range of $ 6 to $ 8. Halfway across that spectrum, the kitchen and bathroom specialist will raise around $ 18 million before IPO expenses are deducted. Additionally, at this level, the company will have a fully diluted market value of $ 68 million.
The shares will trade on the Nasdaq stock exchange under the ticker symbol FGI. The Benchmark Company and Northland Securities represent the Associate Bookkeepers for the Offering.
As you know, new stock quotes present both huge opportunities and the risk of catastrophic financial damage. Famous American investor and entrepreneur Warren Buffett said, “Be afraid when others are greedy and be greedy when others are afraid. Many summarize this sentiment as meaning to buy low and sell high. With an IPO, the philosophy is analogous but not the same: buy early, sell later.
While going downstairs is an attractive proposition, you must realize that not all IPOs are created equal, and they don’t universally benefit from an immediate increase in investor hype. Specific to the FGI share, its potential valuation of $ 68 million places the underlying company in nano-capitalization territory; that is, FGI is a cut below the already risky category of micro-cap stocks, which typically have a valuation between $ 300 million and $ 2 billion.
To put it simply, FGI is in danger of falling sharply if investor confidence does not support stocks early on. But to be fair, there is a non-zero possibility that it could also turn out to be one of the best penny stocks.
Nonetheless, another factor to consider is the ability of the wider investment community to support high-risk companies, especially nano-cap IPOs. At the extreme end of the scale, FederalReserveHistory.org points out that stock trading on margin at least partially contributed to the stock market crash of 1929. Sure enough, the number of traders using borrowed funds has peaked since data retention, signaling serious concerns.
FGI Industries financial history
While more dilapidated homes can still demand a pretty premium in this wild real estate market, astute sellers have recognized that strategic upgrades can generate lucrative returns on investment. According to the National Association of Realtors Research Group’s 2019 Remodeling Impact Report, a complete kitchen remodel is the most sought-after attribute by buyers.
Such a demand is not surprising to Will Rodgers, a Virginia-based real estate agent, who said NextAdviser, “A lot of people spend the most time in the kitchen, and I think it’s the best value for the money.” By logical inference, companies that supply the products necessary for an attractive kitchen remodel are expected to outperform, which bodes well for FGI’s stock.
Better yet, the idea that the home improvement specialist might perform better under the circumstances of the new normal is not just a theoretical reflection. In 2019, FGI achieved sales of $ 126.3 million. But a year later, that figure improved to $ 134.8 million, almost 7% higher. Granted, such a lift wouldn’t be so remarkable in the pre-pandemic era. But following the global health crisis, any the improvement was a cause for celebration.
If that wasn’t encouraging enough, net income in 2020 reached $ 4.73 million, just over triple the $ 1.57 million posted the previous year. So it’s no surprise that FGI saw a significant improvement in its Free Cash Flow (FCF) to $ 5.72 million in 2020, from $ 1.06 million in 2019.
Subsequently, the company’s FCF return (or its financial solvency ratio) is 10.5%, with measures above 7% ranking high. Primarily, a higher FCF yield is ideal because it implies that the underlying business has enough cash flow to meet its obligations.
Yet a major concern is the sustainability of this raging housing bull market that has provided incredible downstream benefits to FGI and its ilk. Ten years ago, the average price of homes was $ 288,225 compared to a median household income of $ 57,623. At the end of 2020, incomes jumped 17% to $ 67,521, but house prices have skyrocketed to $ 389,800.
While many high demand market analysts insist that house prices are not going to collapse, there is not a lot of money available in the system.
Potential of FGI Industries
Perhaps the most obvious feature of this hot housing market is the waiver of inspection contingencies. Usually non-negotiable for the buyer to ensure a wise investment, the new normal dictates all the means necessary to get a foot in the door.
Given the frenetic emotions during this real estate frenzy, more than a few buyers have no doubt discovered less than ideal circumstances once they have received the keys. Therefore, it is possible that the strong renovation demand will continue once the fervor has passed, which bodes well for FGI’s stock.
Moreover, the Fed rate hike could accelerate such initiatives under the Thesis of Speaking Now or Forever. In other words, if consumers were already thinking about renovating (which isn’t a cheap business), they might as well be doing it now in a low cost of borrowing environment.
However, it is not entirely clear that this real estate boom has attracted the ideal age population. According to American scientist, COVID-19 caused a baby bust, not a baby boom. Since raising children may be the main reason young people buy homes, the lack of population growth implies an older demographics which supports housing prices.
And they may not have as much of an incentive to renovate their home as the younger ones.
FGI restrictions for retail investors
Review the Financial Industry Regulatory Authority’s (FINRA) rules on restricted persons before participating in an IPO. Do not sign up if you have inside information.
Not quite so turnkey
Thanks to the gargantuan demand for real estate, favorable winds fell on complementary activities such as renovation-related products, strengthening FGI’s stock profile. However, nothing lasts forever, implying that rough waters can lie on the horizon.