With the once-in-a-century pandemic that is the COVID-19 crisis, a legitimate case can be made that this catastrophe is the worst in modern-day American history. Unlike other horrific tragedies such as the Sept. 11 terror attack, the SARS-CoV-2 virus negatively affected everyone to a conspicuously serious degree. At minimum, the global health threat sidelined everyday social interactions.
While most Americans were thankfully spared becoming infected with COVID-19, several million suffered a devastating economic blow. According to the U.S. Bureau of Labor Statistics, the employment level dropped to approximately 133.4 million in April 2020. To put this outrageous statistic into context, the last time the employment level was this low, former President Bill Clinton was serving his third year in office.
Thankfully, the economy entered a recovery trek shortly after the doldrums of last year, sparking a revival in the labor force. This dynamic sets up an interesting initial public offering (IPO) for Sterling Check, a cloud-based data analytics firm specifically serving the human resources industry in its hiring processes.
Though an undoubtedly relevant new offering, prospective IPO participants must balance the upside opportunity of Sterling Check with its vulnerability to potential discrimination lawsuits.
When Is the Sterling Check IPO Date?
Based on internet traffic statistics, the Sterling Check IPO is one of the most hotly anticipated new issues of this week. At least a component of the demand profile centers on the struggles that many companies face in recruiting attractive candidates, per a report from The Wall Street Journal. Several factors, including lingering fears about the COVID-19 pandemic and generously enhanced unemployment benefits have incentivized many to delay their job hunt.
However, the federal government — along with myriad state governments facing severe budget shortfalls even prior to the global health crisis — cannot forever fiscally support U.S. households that are sitting unproductive. Indeed, a WSJ op-ed from Janet Yellen, U.S. Treasury Secretary, warned that Congress must raise the country’s debt ceiling or risk widespread debt defaults.
In short, the collective impact of the COVID-19 crisis is on the verge of culminating in an economic catastrophe. Therefore, job candidate applications will likely flood HR desks across the nation — indeed, across the globe — so the public market debut of Sterling Check couldn’t come soon enough.
Prospective buyers won’t have to wait long as Sterling Check has a date on the IPO calendar of Sept. 23, 2021. Shares of the background-check firm will trade on the Nasdaq exchange under the ticker symbol STER.
Admittedly, one of the challenges involved in a new offering is obviously its lack of a track record in the market. And in the case of private enterprises combining with special purpose acquisition companies (SPACs), this particular IPO category has generally not fared well in the year-to-date.
Though STER stock represents a traditional new offering process, such a mechanism still carries risk. For instance, Reuters reported earlier this year that IPOs hit an annual record in less than 6 months, which really materializes the harbinger of an IPO bubble.
Still, eager buyers of STER stock will find comfort in top-level support. Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) are joint-lead managers, with Goldman serving as the bookrunner. Baird Capital, KeyBanc Capital Markets, Nomura (NYSE: NMR), Stifel Financial (NYSE: SF) and William Blair are co-managers.
Sterling Check Financial History
Aside from the sheer popularity of the upcoming offering of Sterling Check, robust fundamental catalysts support the idea of STER stock enjoying a strong debut from the get-go.
First, the New York City-based analytics firm plans to raise $300 million through the distribution of 14.3 million shares at a price range between $20 and $22. In the middle of this estimate spectrum, STER stock will command a fully diluted market value of $2.1 billion.
In terms of ownership, Sterling’s IPO prospectus filed with the U.S. Securities and Exchange Commission (SEC) revealed that Goldman Sachs is a majority shareholder. While it’s not wise to bank all your investment decisions on ownership statistics, that a powerful institution like Goldman believes strongly in the company instills confidence in STER stock.
Second, Sterling’s prospectus also notes that its expansive client base encompasses over 40,000 businesses, with over half hailing from the Fortune 100 list and over 45% from the Fortune 500. As well, in the 1-year period ending June 2021, Sterling conducted over 75 million individual job applicant searches for its clients. Also during the same time frame, Sterling booked $545 million in revenue.
Given the need for companies to hire back employees as society either recovers from or acclimates to the COVID-19 pandemic, Sterling stands poised to deliver even more growth in the years ahead. However, the fate of STER stock is tied to the issuing company’s cloud-based platforms, which are responsible for 95% of total revenue.
While compelling in one respect, Sterling faces serious risk factors which you should account for.
Sterling Check Potential
Older millennials will recognize the phrase, “Now you know. And knowing is half the battle.” Broadcasted at the end of every episode of the G.I. Joe cartoon series, this slogan-turned-meme truly represents the upside potential of STER stock. Through intensive background checks — including a deep dive into a candidate’s social media account — Sterling promises to weed out problematic applicants and only present those with a sterling reputation.
The problem? The G.I. Joe aphorism is a double-edged sword for the HR industry. In most cases, knowing causes the battle, as in a legal battle against discrimination charges.
Consider for instance the consequences of too much information. Should a company use a third-party service to conduct social media screenings, it exposes itself to the federal Fair Credit Reporting Act. In fact, most surveyed organizations are concerned about the legal ramifications of uncovering protected data, such as a job applicant’s race, gender, orientation or religious affiliation.
Let’s go beyond the readily apparent risk factors. What about a scenario where an employer hires an individual who expressed support for the Second Amendment on social media, only to later engage in workplace violence? Legally, the employer may no longer have the protection of plausible deniability.
Thus, STER stock doesn’t necessarily have a political risk but rather a mathematical one. By expanding the field to find the perfect candidate, Sterling and its clients risk opening themselves to potentially severe legal liabilities.
How to Buy Sterling Check IPO (STER) Stock
As a traditional public market offering, STER stock presents challenges to most interested retail participants because underwriters prefer to dole out new shares in primary market transactions to their choicest clients, usually institutional investors like mutual funds.
At the same time, the process of acquiring IPO shares is much less complex for retail investors, especially if you already know how to buy stocks. If not, follow the steps below.
Step 1: Pick a brokerage.
For those interested in building their IPO acumen, you should narrow your list of best brokers to platforms that provide pre-IPO access (or new issues at their initial offering price) for select enterprises seeking to go public.
Step 2: Decide how many shares you want.
As the ebb and flow of new offerings this year confirmed, IPOs are risky. Manage the risk by formulating a balanced share count that provides reward potential with downside mitigation.
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 bottom-dollar price.
- Spread: The spread is the rate of profitability for the market maker. Narrower spreads are less profitable for the market maker but also less risky and vice-versa 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).
STER Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons for possible conflicts of interest. Regulators have zero amusement about anyone profiteering from privileged information or even the appearance of such.
Because traditional new public offerings tend to be rarified procedures, companies like ClickIPO provide pre-IPO share access to its members for certain enterprises. Serious market participants should consider opening an account and expanding their field of opportunities.
Balancing Profitability with Risk
As societal and economic forces combine to drive a paradigm shift in the labor market, HR managers face the prospect of an unprecedented wave of job applications. To help filter through the cacophony to find the sonata, Sterling Check’s services are undeniably relevant. Yet buyers of STER stock must hope that the underlying company doesn’t push beyond legal boundaries.