Markets have recovered from Brexit uncertainty, and a pickup in filings, a low VIX Volatility Index and solid IPO returns should help the IPO market build momentum heading into the 3Q16.
June saw 17 IPO filings, the highest level of activity since January, though still well below the 39 filings in June 2015. Moreover, six companies joined the pipeline last week, making it one of the most active weeks of the year. Among these, YETI Holdings and Talend aim to put high-growth consumer and technology IPOs back in play.
The VIX has eased off Brexit uncertainty highs, and the current level indicates a climate more receptive to new issuance. Strong returns also serve as a signal for 3Q activity; the average 2016 IPO is up 15.5% from its offer price. The 11 IPOs in June averaged a first-day pop of 17.4%, compared to +4.1% for the year’s prior offerings, led by VC-backed tech “unicorn” Twilio (TWLO), which gained 92% on day one.
YETI Holdings (YETI), which sells high-end coolers, drinkware and outdoor gear, filed on July 1 for an IPO we estimate could raise $500 million. YETI boasts over $600 million in annual sales with a two-year revenue CAGR of 128% and EBITDA margins of 29%. It is the year’s first filing from a high growth consumer company and will be eligible to launch in mid-July.
Talend (TLND), which provides enterprise clients with a cloud-based data integration platform, filed on June 28 after posting strong subscription revenue growth of 42% in the MRQ ($82mm in annual sales). It joins messaging platform LINE (LN), which filed earlier in the month and is looking to raise $1 billion after recently increasing its price range, signaling a resurgence in tech IPOs may be underway.
