One step Forward, two steps back
Forward Pharma (FWP), which is developing an alternative to and challenging the IP of Biogen Idec's multi-billion dollar Tecfidera treatment for MS, raised $221 and finished its first day down 17%. It was the year's 7th-worst first-day performance out of 226 IPOs.
The biotech first appeared to defy poor market conditions by pricing at the midpoint and offering about 10% more shares than it originally planned. Forward quickly broke issue after trading, however, and is now the fifth biotech in a row to close its first day below the IPO price. It was the largest biotech IPO in over ten years, and the while larger development-stage companies have tended to outperform the smaller ones, Forward has a unique story. If the company wins its interference proceeding against Biogen (BIIB) and completes Phase 3 trials, the stock price should skyrocket (or if Biogen attempts an acquisition), but investors were unwilling to place that bet on Wednesday. Forward's reception in the IPO market could signal difficulty in the week's planned deals (ATRA, VBAY, XENE).
This year has seen four companies raise $100 million or more and then drop over 10% on the first day, and three have been in October (ATTO, MOLG, FWP). The fourth, Candy Crush-maker King Digital (KING), has fallen about 50% from its March IPO.
Dominion IPO could dominate week's returns: MLP up 26%
The significant drop in oil and gas prices has contributed to a selloff in the energy sector, but Wednesday's energy MLP gained 26% after pricing at the high end of the range. Dominion Midstream Partners LP (DM), which was formed by Dominion Resources (D) to own an offshore LNG terminal near Maryland, offers a visible revenue stream and expects dividends to grow quickly.
Banks continue to complete IPOs, even as performance remains lackluster (2014 bank IPOs average 2% from the IPO price, -1% after the first day). Great Western Bancorp, a spinoff of National Australia Bank with 162 branches in the Midwest and $9 billion of assets, priced its IPO below the range and ended Wednesday flat.
| 3 IPOs have mixed returns on October 15 | ||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First Day Return |
| Dominion Midstream Partners LP (DM) |
MLP with an offshore LNG terminal |
$368 |
5% |
26% |
| Great Western Bancorp (GWB) |
Midwestern bank; $9 billion of assets |
$288 | -20% | 0% |
| Forward Pharma (FWP) | Developing a treatment for MS | $221 | 0% | -17% |
The Renaissance IPO Index
The Renaissance US IPO Index (Ticker: IPOUSA), a market-cap weighed basket of newly public companies designed to represent the US IPO market, has gained 5.5% year-to-date. Renaissance Capital's IPO ETF tracks the index, and its top holdings include Alibaba (BABA), Twitter (TWTR), Zoetis (ZTS), Workday (WDAY) and Hilton (HLT).
