Although the U.S. Department of Defense has long specialized in readying the nation’s military forces to deter war and ensure security, the focus has largely been on tangible, visible threats. Incidentally, the biggest headline generator leading up to the new year’s festivities for 2020 was the trade war between the U.S. and China. But it was a microscopic agent that temporarily brought the world to its knees.
Much if not most of the fear associated with the COVID-19 pandemic was an overriding sense of ambiguity. According to a 2015 Ipsos poll, 51% of Americans are “absolutely terrified” of sharks and 38% of respondents reported that they’re scared to swim in the ocean. Why? Likely, it’s not due to feelings of aesthetic repulsion but rather the lingering thought that a maneater could emerge from the dark bottom like a vertically launched torpedo.
But put that same shark in a heavily reinforced aquarium? Suddenly, that fear substantially dissipates. And that’s exactly what Cue Health, a medical technology firm specializing in COVID-19 tests provides — peace of mind during a period of great uncertainty. It’s no wonder, then, that its initial public offering (IPO) has resonated with the market.
When Is the Cue Health IPO Date?
Easily one of the most popular IPOs leading up to its debut, Cue Health garnered this enthusiasm due to its tremendous relevance. Yes, American society and the rest of the global community have acclimated to the “new normal,” which does take some shine off the immediate investment proposition. However, the leadership team behind Cue emphasizes that the firm is more than just a COVID-19 testing equipment provider.
Even if it were only that, the broader narrative supporting Cue Health is still quite robust. Keep in mind that while people are resuming their normal activities, the world has yet to return to its pre-pandemic normal. In addition, the pandemic itself has been stubbornly inviting itself into the populace with its myriad variants. Therefore, testing apparatuses — particularly the molecular-based solutions with rapid turnaround that Cue manufactures — could be (unfortunately) relevant for some time to come.
In that sense, the public offering for Cue Health couldn’t come soon enough. The company inked its debut on the IPO calendar on Sept. 24, with its shares trading on the Nasdaq exchange under the ticker symbol HLTH.
The fanfare was substantial, with shares closing up 25% from their initial offering price of $16. Based on its corporate disclosure, Cue Health distributed 12.5 million shares, resulting in gross proceeds of $200 million before deducting expenses associated with the market debut. Further, the underwriters of the deal have the option to acquire additional shares amounting to nearly 1.88 million.
But as Fierce Biotech points out, “Even without the extra offer, Cue’s IPO tally far exceeds the $100 million placeholder figure included in its S-1 filing earlier this month.” Finance juggernauts Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and Cowen (OTCMKTS: CWGRP) acted as lead bookrunners for this offering.
Cue Health Financial History
First came governmental requests for social distancing and face coverings, then temporary crackdowns on non-essential activities arrived. Eventually, through unprecedented actions such as the Trump administration’s Operation Warp Speed, the biotechnology and pharmaceutical industries came together to introduce novel vaccines.
Although these measures are necessary to normalize society, the reality is that the solution isn’t foolproof. Even the best vaccines do not have a 100% efficacy record since every person has a unique health profile. Therefore, to navigate the still choppy waters, government agencies along with public, academic and professional institutions require rapid, point-of-care testing solutions, naturally suiting the underlying business of HLTH stock.
Better yet, this thesis has proven substance. In 2019, Cue Health generated only $6.6 million in revenue, all of which stemmed from the “grant and other revenue” segment. Not surprisingly, in the following year, Cue obliterated its prior revenue tally, driving the top-line figure to $22.95 million. Product sales represented 67% of total revenue, confirming strong demand from major institutions.
In fact, the debut of HLTH stock benefited heavily from serious backers. As Fierce Biotech noted, “In 2020 alone, [Cue Health] raised $100 million in venture funding, plus $481 million from the U.S. Department of Defense to cover manufacturing costs. This year’s take, too, has been impressive: In May, Cue raked in another $235 million from a group of VC backers.” This group included healthcare giant Johnson & Johnson (NYSE: JNJ).
Enticingly for investors, Cue has parlayed this momentum into significant financial performance this year. Over the half-year period ending June 30, the company posted revenue of $201.9 million, all of which tied to product sales. This skyrocketing of the income statement pinged a near 41-times sales increase on a year-over-year basis.
Thus, the 25% liftoff in HLTH stock had justification as such dramatic paradigm shifts are rare, even in the wild and unpredictable world of healthcare-related innovations.
Cue Health Potential
Despite the enormous sentiment for HLTH stock, it’s fair for prospective investors to ask whether or not the equity unit will sustain this momentum. Obviously, the ongoing COVID-19 pandemic facilitates a credible upside narrative. At present, the Delta variant of the SARS-CoV-2 virus still poses a threat. For instance, former Food and Drug Administration commissioner Dr. Scott Gottlieb told CNN that he doesn’t think the Delta surge has run its course in this country.
At the same time, Dr. Gottlieb clarified that once the Delta threat subsides, it may be the last major wave associated with the novel coronavirus. In other words, if market sentiment for HLTH stock is mostly tied to the current pandemic, it might be an ephemeral tailwind.
To be 100% clear, Cue Health’s management team reiterated that the company’s innovations have been more than a decade in the making. Therefore, Cue is not exclusively a play on the global health crisis. Particularly, the medical equipment firm aims to incorporate tests on women’s health and intimacy-related wellness. Also, management is eyeing assays for both flu and respiratory syncytial virus (RSV).
Ultimately, the potential for HLTH stock might not rest on the testing itself but rather the confidence it provides holistically. For example, users can learn about a potential health risk before it snowballs into a major problem. As well, businesses, government bodies and academic institutions can provide point-of-care testing, ensuring everyone in a particular setting has been properly vetted.
How to Buy Cue Health IPO (HLTH) Stock
In many cases, a traditional IPO process puts retail investors at a disadvantage because underwriters prefer to offer pre-IPO access (or an opportunity to buy new issues at their initial offering price) to choice clients — almost always institutional buyers like mutual funds. Therefore, most regular folks can’t participate in primary market transactions but rather secondary transactions, where a much-hyped equity unit can soar at the open.
Admittedly, that’s exactly what happened with HLTH stock. Nevertheless, it’s not always the case where a fresh debut continues to jump higher. With Cue, a risk exists that the perceived pertinence of the core business may fade with declining Covid cases, thereby possibly presenting a discounted opportunity down the line.
Plus, if you already know how to buy stocks, the process of participation is easy. If not, just follow the steps below.
Step 1: Pick a brokerage.
Increasingly, modern brokerages don’t just focus on access but democratization. For serious IPO investors, you should narrow your choice of best brokers to platforms that provide pre-IPO opportunities.
Step 2: Decide how many shares you want.
Despite the immediate success of HLTH stock, IPOs are unpredictable. As a practice, you’ll want to choose a balanced share count that facilitates upside but also limits downside risk.
Step 3: Choose your order type.
Before placing your first order, acquaint yourself with these market concepts.
- Bid: The buyer’s best offer for a stock.
- Ask: The seller’s lowest acceptable price.
- Spread: The spread denotes the bid-ask difference and the market maker’s profitability margin. Narrower spreads imply lower risk as the market maker can facilitate transactions with high confidence while the opposite is true for wider spreads.
- Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
- Market order: Market orders guarantee fulfillment but only at the prevailing rate.
- Stop-loss order: A mitigation tool for your holdings, stop-loss orders automatically exit your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders are likewise protective but only execute (exit) at a predetermined price, thus facilitating transparency. However, such orders carry the same non-fulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
HLTH Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons for possible conflicts of interest. Severe penalties await anyone caught profiteering from privileged information.
For IPOs in the future, investors should consider opening an account with ClickIPO, which provides pre-IPO access to select enterprises.
Profitability at the Point of Care
Much like the rapid test results that are the hallmark of Cue Health’s core product, HLTH stock quickly garnered the attention of institutional and retail investors alike. Moving forward, though, the intensity of the COVID-19 catalyst is questionable. Nevertheless, with the underlying technology proven under a baptism by fire, Cue stands poised to address many other health-related concerns.