LDR Holding Corp. Quiet Period Expiration Provides Short-Term Buying Opportunity

| About: LDR Holding (LDRH)


The 25 day underwriter quiet period following LDR Holding Corp's (NASDAQ:LDRH) October 8 IPO expires on November 2, an event that will likely correspond with a possible increase in the price of LDRH shares as the underwriters prepare to publish positive research reports on the firm. The underwriters, including Piper Jaffray (NYSE:PJC), William Blair, Bryan, Garnier & Co, Cowen & Co, JMP Securities, and Stephens Inc., will attempt to capitalize on the successful public offering. the IPO priced at $15.00 per share and the stock closed at $20.68 as of October 24th. See also http://seekingalpha.com/article/1732722-ldr-holding-ipo-gives-us-back-pain-at-proposed-range

A correlation between the visibility and quantity of IPO underwriters and a rise in share price as the quiet period ends has emerged as the empirical result of our recent work and through several academic studies that tracked stock prices leading up to and including the expiration of the quiet period. Typically, an increase in price begins to appear days in advance of the release of positive research reports - many investors know that the underwriters will publish positive detailed reports praising the prospects of the firm they recently took public. The underwriters have no interest in undermining a firm that they recently underwrote and got paid a huge fee.


We believe it is probably as good a time for aggressive investors to buy LDRH. While the stock price may not be able to sustain the growth that it has enjoyed since its IPO, it also appears to be in little danger of seeing eroding value over the next few days.

That said, we still think LDRH is an aggressive long term buy. LDRH is highly vulnerable to the development of superior spinal surgery technology on the part of competitors, since it currently only has two products on the market. This risk is compounded by the numerous competitors seeking to develop similar products, including DePuy Synthes Spine, a division of Johnson & Johnson (J&J), Medtronic Spine and Biologics (NYSE:MDT), Nuvasive (NASDAQ:NUVA), Globus Medical (NYSE:GMED), and Stryker (NYSE:SYK).

LDRH also is in a business traditionally hounded by vulture-like attorneys. The firm itself provides an almost comically long list of risk factors in its S-1 filing. In general, the firm is subject to risks that could cause swift stock price decline and losses without much warning to investors.

LDRH is a medical device firm that has designed and commercialized a pair of spinal treatment platforms, the VerteBRIDGE fusion and Mobi non-fusion platforms, which are designed for treatments in both the cervical and lumbar spine. VerteBRIDGE products have been put to use in over 30,000 device implantations since the 2007 launch of the platform. LDRH's Mobi-C cervical disc replacement device recently was introduced to the American market after approximately 17,000 procedures abroad.

Like other medical device companies, LDRH faces a somewhat murky future with the ongoing implementation of the Patient Protection and Affordable Care Act (AKA ObamaCare). The new healthcare system may decrease the rate of reimbursement for medical procedures, which would spell trouble for firms like LDRH.

Co-founder, CEO and President Cristophe Lavigne has held his current positions since 2006. Mr. Lavigne has additionally held the positions of Chairman and President of Médical and its predecessor since 2000. Mr. Lavigne boasts over 20 years experience with spinal device companies, mostly in executive sales and marketing positions.

Disclosure: I am long LDRH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.