Are you looking to buy an IPO? With Sofi Active Invest you can participate in upcoming IPOs before they trade on an exchange.
Well before the pandemic — when the word “corona” was associated with lazy summers on the beach rather than with face masks and quarantines — large e-commerce firms had done a number on brick-and-mortar retail establishments. Following the initial breach of COVID-19, consumers gravitated even more so to online outlets.
Thus, the initial public offering (IPO) of Phillips Edison & Company, a real estate investment trust (REIT) focusing on neighborhood shopping centers, seems an anachronistic venture. However, its specialization in the grocery industry gives the organization surprisingly robust relevance.
When is the Phillips Edison & Company IPO Date?
Those interested in this grocery-anchored retail marketplace REIT should prioritize their research as Phillips Edison & Company has a date of July 15, 2021, on the IPO calendar. Its shares will trade in the Nasdaq exchange under the ticker symbol PECO.
From its filings with the Securities and Exchange Commission, Phillips Edison plans to offer 17 million shares in its public market debut. Covering analysts anticipate that the offering will price between $28 and $31 per share. At the midpoint of this range, the proceedings will accrue $501.5 million, making it one of the biggest projected raises among IPOs for the week of July 12.
Also, at the average offering price, Phillips Edison will command a fully diluted market value of $3.7 billion. Joint bookrunners include numerous major underwriting firms, including Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM).
One factor to keep in mind is that when PECO stock makes its debut, it will do so under crowded conditions. On that day, five other companies will make their debut on American exchanges, including the much-anticipated F45 Training Holdings Inc IPO, a celebrity-backed community-driven fitness franchisor. Therefore, it’s possible that PECO may encounter higher-than-usual choppiness on its introduction.
Phillips Edison Financial History
In 2019, Grand View Research noted that the global food and grocery retail market reached a value of $11.7 trillion in 2019. Experts suggest that by 2027, worldwide revenue for the sector could hit $17.3 trillion. Although the COVID-19 pandemic generally devastated the retail landscape, grocery stores found themselves enjoying a reprieve. For instance, shares of grocery giant Kroger (NYSE: KR) didn’t suffer the cataclysmic declines that other stocks did during Q1 of last year.
In fact, KR stock gained almost 6% in Q1 2020, one of the few bright spots during the pandemic where investors could benefit from capital appreciation. Therefore, Phillips Edison managed to significantly mitigate damage to its top and bottom lines relative to other retail REITs not tied to grocery stores or other essential businesses. In other words, Phillips did lose growth opportunities but the situation could have been much worse.
For example, the company generated revenue of $485.5 million for 2020, which was down 7% against the prior year’s result of $522.3 million. Ordinarily, that’s not the kind of statistic you want to see, particularly as Phillips Edison increased top-line sales by 32% between 2018 to 2019. However, you must look at the bigger context.
Take Simon Property Group (NYSE: SPG). A powerhouse REIT engaged in the ownership of premier shopping, dining and entertainment establishments, SPG stock cratered when the public health crisis forced the temporary closure of nonessential businesses. As a result, its 2020 revenue was down 20% year-over-year, while net income slipped 47% over the same period.
Contrast this painful circumstance with Phillips Edison, which pulled in positive profitability in 2020 of $5.5 million, a sharp divergence from 2019’s massive net loss of nearly $73 million.
Phillips Edison Potential
On the surface level, investors may find difficulty shifting their funds toward a grocery-based REIT rather than a consumer discretionary name such as Simon Property Group. For one thing, retail revenge is a much-covered topic. Basically, consumers who found themselves locked out of their favorite activities — socializing, watching movies or going on vacation — have become antsy. This pent-up demand is ready to explode onto the products and services that COVID protocols denied.
Further, the pandemic itself may have permanently changed consumer behaviors. Generally speaking, society is much more aware of microbiological threats than compared to the pre-pandemic era. Naturally, this dynamic bodes well for online retail channels and government data reflects provides supporting evidence. In Q1 2021, e-commerce represented 13.6% of total retail sales, a much higher proportion than the 11% seen before the crisis.
However, patient investors willing to ride through volatility may be rewarded with PECO stock. Primarily, money velocity — or the rate at which each unit of currency circulates in the economy — dropped to near all-time recorded lows. Indeed, an academic research paper from the National Bureau of Economic Research indicates that the present money velocity rivals lows seen during the Great Depression. That’s a staggering lack of confidence.
Second, the personal saving rate remains extraordinarily high, contradicting the post-COVID economic recovery narrative. Such data suggests that consumers are not about to spend wildly on luxury items, providing an indirect tailwind for consumer staples businesses like Phillips Edison.
How to Buy Phillips Edison IPO (PECO) Stock
Because of the complexities and variances involved with IPOs, many financial advisors recommend inexperienced investors to be careful with public market debuts. In part, this warning stems from the proceedings’ exclusivity. With only so many shares to work with, underwriters offer pre-IPO shares (often at attractive discounts) only to their best clients.
Unfortunately, this circumstance boxes out virtually all retail investors. Therefore, members of the public are left to participate in IPOs at the open.
Nevertheless, this route isn’t completely disadvantageous. First, you can choose which IPOs to participate in without undue pressure. Second, if you already know how to buy stocks, you can jump right in. If not, follow these steps.
Step 1: Pick a brokerage.
Brokerages represent a lesson in innovation. During the advent of the internet, online brokers were all the rage — but they were pricey. Today, the mass proliferation of mobile trading apps delivered financial access to everyone. To stay competitive, the brokerage industry standardized key financial incentives, such as commission-free trading.
What does this mean for you? Mainly, you can choose your platform based on your needs and preferences. Below is a list of the best brokers to consider.
Step 2: Decide how many shares you want.
Easy to overlook, your share count is critical as it determines your risk-reward profile. Acquiring more shares allows you to enjoy greater profitability if your target stock rises in value. However, unforeseen volatility could leave you with hefty losses. Therefore, choose a number that you’re comfortable with.
Step 3: Choose your order type.
Understand these market concepts before placing your first wager.
- Bid: The bid is the buyer’s maximum offer. It is always lower than the ask.
- Ask: In contrast, the ask is the minimum price a seller will accept. It is always higher than the bid.
- Spread: The difference in the bid and ask price, the spread also signifies market liquidity and risk profile. Tighter spreads indicate strong demand and a willingness to negotiate between buyers and sellers. Conversely, wider spreads indicate less demand and more risk.
- Limit order: To trade stock at a specific price, use a limit order. Be aware that there is no guarantee the market will fulfill your order.
- Market order: For a quick trade, you can transact at the current rate through a market order. Buy orders execute on the ask and sell orders on the bid.
- Stop-loss order: Deployed for protecting your portfolio against sudden downside action, a stop-loss order exits your position at either a predetermined price or the next available price, whichever comes first. The main risk involves gap-down sessions or severe volatility between sessions.
- Stop-limit order: To control against automated exits during these gap downs, use a stop-limit order. However, if volatility persists, you would have been better off with a stop-loss order.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Limit orders follow an identical sequence, except you must enter your desired execution price.
PECO Restrictions for Retail Investors
Before participating in an IPO, you should examine the Financial Industry Regulatory Authority’s (FINRA) rules on restricted persons. In a quick summary, those with insider information cannot advantage their confidential data.
Theoretically, underwriters can offer anyone pre-IPO shares or equity units priced at a discount relative to what they might fetch in the open market. Unfortunately, this never happens as underwriters dole out shares to institutional investors, which are the most profitable clients.
But companies like ClickIPO act as an institutional buyer on behalf of public investors. Therefore, it’s possible for anyone to acquire pre-IPO shares. ClickIPO does not offer early bird offerings of PECO stock.
A Retail Play for the New Normal
With the American consumer agonizing over the lost year that the COVID-19 pandemic imposed, people are ready for payback. Armed with stimulus checks and savings resulting from the year-long experiment with remote work, the narrative for consumer discretionary investments appears strong.
However, the underpinnings of the economy are not wholly encouraging. Therefore, a consumer staples opportunity via PECO stock may suit your investment outlook.
Related content: IPO Calendar
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