Today, I got an email from my broker to look into an IPO investment. The firm is homeunion, a start-to-end real estate investment platform. The firm basically helps the investor find a rental property, finance the acquisition of the property, and manage it. Quite a good idea, however, as an IPO, hmmm, I am quite skeptical.
Here are some issues that I found.
- The firm size is very small and the offering is also small, quite risky. They are using a form 1-A filing, which is for small offerings.
- Not prestigious underwriter or Big 4. Of course, brand names are never a guarantee but at least they assure minimum quality most of the times.
- The Underwriter changed from WR Hambrecht + Co, LLC to B. Riley & Co. and Felt and Co. from the original 1-A to the most current 1-A/A.
- Going concern. Yup, it is burning cash really quickly..
- Use of proceeds are mainly to pay down debt. Eh..not the best choice if you claim to be growing quite well. Wouldn’t you want to invest in positive NPV projects?
- Vague use of proceeds..Probably, not a good sign.
- Accounting issues. The firm has material weakness, meaning the accounting has problems.
So overall, I say this is probably a good IPO to short if it becomes public. Let’s see how it does if it goes public.
Wonder what the SEC comments are saying…