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.

  1. 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.
  2. 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.
  3. 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.
  4. Going concern. Yup, it is burning cash really quickly..
  5. 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?
  6. Vague use of proceeds..Probably, not a good sign.
  7. 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.

PS

Wonder what the SEC comments are saying…

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