Intriguing IPOs: Hinge Health (HNGE)

Every IPO provides some memorable lessons. Hinge's is a reminder that all companies get a pre-IPO touch up.

The archangel Raphael helping Tobias cure Tobit of blindness, Francesco Rustici, 1610-1625, oil on canvas

IPOs are akin to putting lipstick on a pig.

Ok, I’m using a bit of hyperbole here, but just about every company that has gone public has done something in the weeks or months leading to its public listing to make its stock look more attractive.

Maybe a management team holds off on a major capital investment. Or maybe they draw down inventory levels to lower its working capital requirements and make returns look a little better. It might even pull forward some revenue to make its growth rates higher. Either way, there are loads of ways management teams give their financial statements a glow-up before going to market.

For investors, it’s important to be able to spot at least some of these pre-IPO shenanigans.

Some can be hard to spot, while others are more obvious.

Hinge Health’s (NASDAQ: HNGE) prospectus is an excellent example of a not-so-subtle pre-IPO glow-up. Some of the numbers look surprisingly good for a fast-growing healthtech company. If you dig into some of the specific line items, though, there are some rather obvious ways management gave this prospectus a touch-up.

Let’s dig in.

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