Primarily operating as a specialty insurance and warranty coverage provider for businesses, The Fortegra Group IPO offered stability for its parent company Tiptree (NASDAQ: TIPT). Unfortunately, the pandemic imposed a dark cloud on Fortegra and the broader insurance industry and reduced revenue growth potential.
But the economy appears to be on a recovery path. This bodes well Fortegra’s initial public offering (IPO). Here’s how to get involved.
The Fortegra Group Financial History
Insurance companies can provide stable returns for stakeholders, especially insurance providers for businesses. With the world becoming much more complex, enterprises have a vested interest in protecting their assets from theft, natural disasters, litigations and other adverse events. Likely, though, what management probably didn’t consider was a once-in-a-century pandemic.
Sadly, but as you might reasonably expect, the COVID-19 crisis hurt The Fortegra Group’s financials. From its Form S-1 filing with the SEC, Fortegra revealed that in 2020, it generated $23.2 million in net income. This was down nearly 19% from the $28.6 million the company rang up in 2019.
Still, prospective buyers of FRF stock should look forward to the post-COVID future as last year’s devastation was a one-off headwind. As evidence, under the Fortegra Financial brand (as a Tiptree subsidiary), the insurer raised $125 million in a post-IPO equity funding round on October 18, 2017.
Once our society and economy normalize, the framework for Fortegra could, and should, shift positively. While Fortegra withdrew its IPO in 2021, the firm could refile for a new IPO at any time, and with massive potential in their industry, anything could happen.
The Fortegra Group Potential
As a major specialty insurance and warranty provider, The Fortegra Group essentially plays the role of a bellwether entity. Should economic activity improve substantively, you will see this dynamic reflected in Fortegra’s market valuation. Simply put, consumption and acquisition of goods and services bolsters demand for their protection.
This is why lower interest rates do not help The Fortegra Group nor its competitors. True, insurance firms depend on yield and when benchmark rates decline, they must depend on higher-risk investments. But it’s also important to recognize why interest rates decline.
As you saw last year, monetary policymakers spark reductions in the rates to encourage borrowing and spending activities during periods of economic lull. This downturn in activity ultimately hurts insurers because it implies fewer entities are acquiring assets, reducing demand for insurance-related services.
Thankfully, the economy is improving substantively from its low point. As well, nearer-term data such as weekly initial jobless claims are pointing in the right direction, down.
Naturally, the benchmark interest rate increased significantly from last year’s bottom. And that is very encouraging for Fortegra stakeholders.
How to Buy The Fortegra Group IPO (FRF) Stock
Traditionally, you have two ways to participate in an IPO. First, if you are a well-connected sophisticated private investor, you may receive a tap on the shoulder to purchase shares at their initial offering price. This allows you to advantage the fabled IPO pop, or the big jump in price when a stock first hits the public market.
On the other hand, regular retail investors typically must wait until the launch day to participate, just like everyone else. However, this approach has its own advantages. Most importantly, if something goes wrong prior to launch, you won’t have to suffer financially for it.
Also, participating in an IPO on its debut is the most straightforward method. If you already know how to buy stocks, you’re good to go. If you don’t, follow the easy steps below.
- Pick a brokerage.
Before you can participate in any publicly traded security, you must pick a brokerage. Prior to the advent of mobile investment and trading apps, this decision-making process was stressful. That’s because many brokers featured huge price variances in terms of fees and commissions.
But with convenient platforms dominating the brokerage space, classic capitalistic competition drove down prices for clients. Today, the industry standardized most of the incentives to join a particular broker, such as commission-free trading. This leaves you to choose based on your personal life situation.
If you work a busy schedule, you may find that a mobile trading app serves your needs well. However, if you want to develop your investing acumen, you should choose a robust, comprehensive platform. - Decide how many shares you want
Now that you’ve picked your brokerage, it’s time to decide how many shares you want. This decision boils down to your risk-reward tolerance. If you buy more shares, you will accrue greater profits when the target stock rises. Conversely, if the stock declines, you will absorb more losses.
Whatever share count you decide, stick to it on the IPO day. You want to make decisions based on well-reasoned strategies, not on the emotions of the moment. - Choose your order type.
Before you place your first trade, you must consider which order type to use, which takes into account the price variability of the market. Below are important concepts to understand.
• Bid: The bid is the highest price a buyer will offer for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the lowest price that a seller will accept. It is always higher than the bid.
• Spread: The spread simply reflects the difference between the bid and ask price but it’s also an important indicator of liquidity and risk. A narrower spread signals higher liquidity levels and lower risk (because you can reasonably depend on a buyer willing to purchase your shares). A wider spread indicates lower liquidity and higher risk (because a buyer may not exist at the price you want to sell shares).
• Limit order: Use a limit order to buy stock at a specific price. Since no guarantee exists that the target stock will reach said price, you risk leaving your order hanging unfulfilled.
• Market order: To buy shares at the next available price, use a market order. Buy orders execute on the ask, while sell orders execute on the bid.
• Stop-loss order: Use stop-loss orders to protect your holding against downside risk, which automatically exit your position at either a predetermined price or the next available price. Be aware that a gap-down session where a stock opens at a much lower price than the prior session’s close can result in steeper-than-anticipated losses.
• Stop-limit order: Stop-limit orders exit you only at a predetermined price. The risk here is that your target stock never reaches the stop-limit price. - Execute your trade.
To execute your trade, follow these steps for a market order:
1. Select action type (buy or sell).
2. Enter the shares you want to acquire (or sell).
3. Hit the buy (or sell) button.
Limit orders follow the same process with the exception that you must also enter your desired execution price.
Best Online Stock Brokers
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Banking on a Rebound
The key word for The Fortegra Group IPO could be timing. Usually, insurance providers perform poorly during economic downturns due to a lack of consumption and lower yields. But with COVID-19 cases declining sharply in the U.S., the FRF IPO could perform well on anticipation of a full recovery.
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.