Based in Hong Kong, Top Wealth Group (NASDAQ:TWG) bills itself as a fast-growing supplier of luxury caviar products. Earlier today, the company launched its initial public offering (IPO). However, TWG stock utterly tanked, losing more than half its market value in the late afternoon hours. Controversy over the caviar trade may have doomed the IPO.
In fairness, Top Wealth claims that the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) endorses the enterprise, certifying that the company legally trades its caviar. However, such a distinction clashes with contemporary norms. One report shows that globally, 85% of people indicated that they have shifted their purchase behavior toward more sustainable purchases.
Sustainability and caviar historically represent two concepts that simply don’t align. Below are other factors to consider regarding the debut of TWG stock.
1. Top Wealth Sought to Raise $10 Million
According to its filing on Nov. 21, 2023, Top Wealth disclosed the terms for its IPO. The debut planned for the distribution of 2 million shares priced between $4 to $6 per share. At the midpoint range, the company aimed to raise $10 million in gross proceeds. On Tuesday, TWG stock debuted at a price of $5.50.
2. TWG Stock Is a Micro-Cap Enterprise
According to data from IPOScoop, Top Wealth posted revenue of $11.8 million in the last 12 months. Further, its net income came in at $2.3 million during the same period. However, with a market capitalization of only $145 million, TWG stock is within micro-cap status. This label applies to businesses that feature a valuation between $50 million to $300 million.
3. Significant Growth Potential Claimed
Although it’s a tiny enterprise, Top Wealth claims significant sales growth with its Imperial Cristal Caviar brand. It conducts operations through business-to-business (B2B) sales, which TWG claims enables the entity to broaden the reach of its products swiftly and effectively. Its caviar products are mainly sold to customers in Hong Kong. However, a substantial portion is exported overseas.
4. Large Addressable Market
According to data from Mordor Intelligence, the caviar market size in 2024 is estimated to be around $373 million. By 2029, experts project that the sector could see a valuation of $547.03 million. If so, this expansion would represent a compound annual growth rate (CAGR) of 7.96%.
5. Covid-19 Impacted the Caviar Market
Cynically, what should benefit TWG stock over the long run is the Covid-19 pandemic’s broader impact on the market. In the U.K., Exmoor Caviar — a major producer — sold out all of its caviar inventory at the end of 2020. This increased demand may contribute to lingering interest in caviar.
6. Caviar Is Wildly Controversial
Historically, many wildlife advocates have sharply criticized caviar due to its impact on wild sturgeons. According to Animal Justice, sturgeons represent the most endangered species group on earth. In addition, huge concerns exist about the cruelty involved in slaughtering sturgeon for their eggs.
7. Not All Fish Eggs Are Caviar
Given the extremely high cost of caviar, there are several products marketed as caviar that are not the real deal. Only sturgeon roe constitute legitimate caviar. Texture-wise, real caviar is soft, whereas imitation products often feature a harder if not “crunchy” profile.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
