Contributor, Benzinga
December 22, 2021
$2.35
0.025[1.08%]
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Vol / Avg.17.141K / 15.927KMkt Cap13.436M
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After what appeared to be an encouraging lull in the COVID-19 pandemic, a new mutation again sent jitters among international policymakers, imposing yet another dark cloud on global investment indices. Recently, Benzinga reported that the rapid spread of the omicron variant forced organizers for the annual World Economic Forum to reschedule the event.

Still, investors have reasonable assurances that, at some point, the crisis will fade away, either through mass immunization initiatives or acclimatization to a potentially endemic situation similar to seasonal influenza. Thanks to the rapid deployment of advanced vaccines developed through a clinical provenance that extends for decades, modern society has never been more able to respond to widespread health threats.

Increasingly, then, the opportunity in the broader health-and-beauty space revolves around companies that can address ongoing or acute concerns not directly associated with the SARS-CoV-2 virus. For instance, mitigation products for sports-related wounds should rise in the years ahead as activity levels for both children and adults resume a normal trajectory.

Additionally, the beauty segment should rebound, with retail revenge from a year in quarantine inspiring consumers to reclaim their daily routines. As well, a possible return to the office promotes beauty care products, which is a positive sign for hydrogel specialist NexGel Inc.

When Is the NexGel IPO Date?

While the benchmark equity indices have recently printed charts that are more representative of seismic activity than typical trading sentiment, one subsegment continues to rapidly rotate the turnstiles: new market offerings. Prior to the pandemic, the initial public offering (IPO), or the first time a private company distributes its equity shares to the public, epitomized a high-risk venture.

Today, due to the sharp rise of meme stocks and cryptocurrencies, retail investors seemingly don’t blink an eye regarding hazardous market ideas — as long as the reward potential is likewise elevated. In that respect, traders who have funds earmarked for speculation may want to consider a nano-capitalization IPO like NexGel.

As Benzinga contributor Sarah Horvath stated, a nano-cap stock references public companies that feature a total capitalization below $50 million. Some are considerably below this threshold, causing them to fly well under the radar. Although this fact alone presents tremendous danger to your portfolio, Horvath explains that these micro-cap entities “may represent a higher potential for growth when compared to large-cap stocks.”

For NexGel specifically, it will ink its debut on the IPO calendar on Dec. 22. Shares will price one day earlier, with the company anticipating a per-share rate of $6.83. With 2.1 million shares scheduled to be distributed on the deal, NexGel will raise approximately $14.3 million before deducting expenses associated with the IPO.

Maxim Group LLC represents the offering’s lead bookrunning manager. Shares will trade on the Nasdaq exchange under the ticker symbol NXGL.

To be sure, a $14 million deal will not suit a conservative portfolio geared toward stable or reliable enterprises. However, as Horvath noted, nano caps “draw investors with a limited amount of capital,” allowing them to buy more shares of stock while still providing flexibility to consider other opportunities.

Still, perhaps the biggest advantage to nano caps is the law of small numbers. A key reason why it’s easier to accelerate a car at low velocity compared to a higher velocity (all other things being equal) is that inertial mass increases as objects speed up. Therefore, accelerating a higher-velocity vehicle comparatively requires greater energy input.

It’s a similar principle with nano-cap stocks. Unlike blue chips, any news, rumors of upcoming news or even no news at all can spark wild trading in micro investments. Further, you don’t need to spend as much money to see possibly outlandish gains.

Just keep in mind that the law of small numbers works in the opposite direction as well. Therefore, strict money management is a must.

NexGel Financial History

At first blush, the aqueous polymer hydrogel market may not seem like a particularly pertinent one. But the reality is that it undergirds myriad over-the-counter solutions for wound care, beauty products and injury prevention. For instance, footcare companies manufacture hydrogel stick-on products to help users prevent blisters, providing a barrier against rubbing and chafing.

Additionally, hydrogels underline multiple beauty-care products, including hydrating facemasks. Due to their skin-friendly profile (with the majority of the product composition being water), users can wear them for extended periods, even overnight. As well, hydrogels provide soothing fever and migraine relief, along with the potential for custom applications.

Despite its smaller size, what makes NexGel stand out from the competition is its proprietary manufacturing technologies, enabling it to address enterprise-level clients’ needs quickly and efficiently. Historically, NexGel served as a contract manufacturer, supplying hydrogels to third parties per its IPO prospectus. However, beginning in the third quarter of 2020, the company began selling its own branded products on Amazon.com Inc. (NASDAQ: AMZN). Presently, NexGel has nine distinct product offerings with plans to introduce more.

Perhaps surprising to some investors, NexGel enjoys a large total addressable market. According to ResearchAndMarkets.com’s data, the global hydrogel industry could command a valuation of $15.3 billion by 2025. Experts believe that “growing use in wound care products and drug delivery systems (DDS)” should drive most of the demand.

Moreover, Fortune Business Insights offered additional context to this burgeoning sector: “An important factor boosting the chronic wound care market growth is the rising prevalence of diabetes in the world, followed by the associated chronic wounds such as diabetic foot ulcers. In addition to that, the rapidly increasing population of aged people and their vulnerability to various health issues is also an important factor expected to increase the overall market size.”

Put another way, NexGel might not lack for expansion opportunities. Still, it’s important to have measured expectations when dealing with NXGL stock.

Mainly, the underlying company is an emerging-growth firm, complete with upward mobility potential but also severe downside risk. For example, revenue of $1.02 million in the nine months ending Sept. 30 represents a 78% year-over-year lift. At the same time, net loss widened to $2.7 million from a loss of $1.6 million a year prior.

NexGel Potential

One of the biggest factors benefitting NXGL stock is its timing. Although NexGel will enter the fray right when the omicron variant is spreading across the globe, prior spikes in infections eventually waned. True, historical precedent may not always carry forward. However, advancements in COVID-19 treatment and vaccination protocols have adjusted to the threat.

Just as critically, the global community cannot sustain a state of emergency indefinitely. As consumer fears subside, demand for non-COVID-related products and services should rise. Furthermore, both wound care and beauty care should enjoy a conspicuous industry sales uptick as people have dramatically increased their physical activities since the doldrums of 2020.

Nevertheless, investors cannot afford to lose discipline with something like NXGL stock. No matter how a nano-cap firm markets itself, an extremely small company is that way for a reason. And usually, the reason isn’t a particularly encouraging one.

Finally, NXGL, by virtue of it being a lower-volume equity unit, will most likely incur visibility challenges. With large segments of the public hunting the headlines, NexGel can languish under the weight of anonymity.

How to Buy NexGel IPO (NXGL) Stock

With NexGel soon to make its debut, interested buyers should learn how to buy stocks to acquire shares at the open. Below is a quick refresher.

Step 1: Pick a brokerage.

If you haven’t already picked a brokerage, you should know that the best brokers compete on similar financial incentives. Therefore, go with a platform that meets your needs.

Step 2: Decide how many shares you want.

IPOs are always risky, and the nano-cap variety makes it especially so. Therefore, choose a balanced share count to help mitigate potential downside movements.

Step 3: Choose your order type.

Before trading, learn these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • 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 current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

NXGL Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

NXGL Pre-IPO

Although NXGL is not available for pre-IPO purchase, Freedom Finance offers early bird access for some of the most anticipated public debuts. Open an account if you’re interested in building your IPO acumen.

Nano Cap Your IPO Holdings

On the surface, NexGel’s hydrogel specialty might not seem that attractive, yet an anticipated surge of physical activity could make its IPO very relevant. At the same time, its nano-cap status makes NXGL stock a double-edged sword, presenting opportunities but also steep risks.

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About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.