First Person Aims For $8 Million U.S. IPO (Pending:FP)

What Is First Person?

Calgary, Canada-based First Person Ltd. (FP) was founded to develop a vertically integrated supply chain operation for the cultivation and final sales of mushroom-based products.

Management is headed by president, Chairman and CEO Cory J. Rosenberg, who has been with the firm since January 2021 and was previously co-founder of Hook & Albert, a premium international fashion and consumer brand.

The company’s primary offerings include:

• Functional mushrooms

• Nutraceutical products

• Psychedelic mushrooms

As of June 30, 2022, First Person has booked fair market value investment of $7.5 million as of June 30, 2022 from investors including Luminous Capital and others..

The company has produced minimal revenue to-date from the sale of organic mushrooms.

First Person intends to enter into long-term supply agreements for a variety of functional mushroom products and nutraceuticals derived from mushroom substances.

First Person’s Market & Competition

According to a 2022 market research report by Grand View Research, the global market for functional mushrooms was an estimated $25 billion in 2021 and is forecast to reach $47.1 billion by 2028.

This represents a forecast CAGR of 9.5% from 2022 to 2028.

The main drivers for this expected growth are a growing interest by health product manufacturers in the use of mushroom products and substances by consumers.

Also, below is a historical and projected future growth trajectory chart of the U.S. functional mushroom market:

Major competitive or other industry participants include:

• New Wave Holdings Corp

• M2 Ingredients

• Nammex

• CNC Exotic Mushrooms

• Mitoku Company

• Hokkaido Reishi Co. Ltd

• Shanghai Finc Bio-tech Inc

• Lianfeng (Suizhou) Food Co. Ltd

• Hirano Mushroom LLC

• Others

First Person’s IPO Date & Details

The initial public offering date, or IPO, for First Person has not yet been indicated by the company or the IPO’s underwriter.

(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should use caution when thinking about investing in an IPO, or immediately post-IPO. Also, investors should keep in mind that many IPOs are heavily marketed, past company performance is not a guarantee of future results and potential risks may be understated.)

First Person intends to raise $8 million in gross proceeds from an IPO of its common stock, offering approximately 1.1 million shares at a proposed midpoint price of $7.25.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $46.5 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 14.8%. A figure under 10% is generally considered a “low float” stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

We intend to use some of the net proceeds of this offering to support FP, Inc. in launching and growing an initial product line of three nutraceutical consumer facing products, as well as expansion of growing and production capabilities in Olympia, Washington.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not presently a party to any legal proceedings that would have a material adverse effect on its financial condition or operations.

The sole listed bookrunner of the IPO is EF Hutton.

How To Invest In The Company’s Stock: 7 Steps

Investors can buy shares of the stock in the same way they may buy stocks of other publicly traded companies, or as part of the pre-IPO allocation.

Note: This report is not a recommendation to purchase stock or any other security. For investors who are interested in pursuing a potential investment after the IPO is complete, the following steps for buying stocks will be helpful.

Step 1: Understand The Company’s Financial History

Although there is not much public financial information available about the company, investors can look at the company’s financial history on their form S-1 or F-1 SEC filing (Source).

Step 2: Assess The Company’s Financial Reports

The primary financial statements available for publicly-traded companies include the income statement, balance sheet, and statement of cash flows. These financial statements can help investors learn about a company’s cash capitalization structure, cash flow trends and financial position.

My summary of the firm’s recent financial results is below:

The firm’s financials show little revenue as the firm has only begun sales in the six months ended June 30, 2022.

Free cash flow for the twelve months ended June 30, 2022, was negative ($4.8 million).

The firm currently plans to pay no dividends and to reinvest any future earnings back into the company’s growth initiatives.

FP’s trailing twelve-month CapEx Ratio indicates it has spent money on capital expenditures despite operating cash use.

Step 3: Evaluate The Company’s Potential Compared To Your Investment Horizon

When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying shares. For example, a swing-trader may be interested in short-term growth potential, whereas a long-term investor may prioritize strong financials ahead of short-term price movements.

Step 4: Select A Brokerage

Investors who do not already have a trading account will begin with the selection of a brokerage firm. The account types commonly used for trading stocks include a standard brokerage account or a retirement account like an IRA.

Investors who prefer advice for a fee can open a trading account with a full-service broker or an independent investment advisor and those who want to manage their portfolio for a reduced cost may choose a discount brokerage company.

Step 5: Choose An Investment Size And Strategy

Investors who have decided to buy shares of company stock should consider how many shares to purchase and what investment strategy to adopt for their new position. The investment strategy will guide an investors’ holding period and exit strategy.

Many investors choose to buy and hold stocks for lengthy periods. Examples of basic investing strategies include swing trading, short-term trading or investing over a long-term holding period.

For investors wishing to gain a pre-IPO allocation of shares at the IPO price, they would ‘indicate interest’ with their broker in advance of the IPO. Indicating an interest is not a guarantee that the investor will receive an allocation of pre-IPO shares.

Step 6: Choose An Order Type

Investors have many choices for placing orders to purchase stocks, including market orders, limit orders and stop orders.

• Market order: This is the most common type of order made by retail traders. A market order executes a trade immediately at the best available transaction price.

• Limit order: When an investor places a buy limit order, they specify a maximum price to be paid for the shares.

• Stop order: A buy-stop order is an order to buy at a specified price, known as the stop price, which will be higher than the current market price. In the case of buy-stop, the stop price will be lower than the current market price.

Step 7: Submit The Trade

After investors have funded their account with cash, they may decide an investment size and order type, then submit the trade to place an order. If the trade is a market order, it will be filled immediately at the best available market price.

However, if investors submit a limit order or stop order, the investor may have to wait until the stock reaches their target price or stop-loss price for the trade to be completed.

The Bottom Line

FP is seeking U.S. public capital market investment to fund expanded production and manufacturing and for general corporate purposes.

The market opportunity for functional mushrooms is large and expected to grow at a reasonably high rate of growth in the coming years, so the company has strong industry growth dynamics in its favor.

EF Hutton is the lead underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (68.1%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risks to the company’s outlook as a public company is its tiny size, thin capitalization and lack of operating history.

As for valuation, management is asking investors to pay an EV/Revenue multiple of approximately 43x, which is extremely high due to the lack of revenue history for the firm.

Although the IPO stock’s low nominal price will likely attract day traders seeking volatility opportunities, given these issues I’m on Hold for the First Person IPO.