After a month of inactivity during the busiest year for IPOs since 2000, investors appear eager for IPOs as ReWalk Robotics flew up over 100% in Friday trading, the year's fifth IPO to do so. In addition to an annual August pause in the IPO market, large deals have held off until Alibaba floats its $20+ billion IPO, currently expected to begin trading Friday the 19th. We note that Alibaba is the first of five billion-dollar global internet companies poised to go public in 2014.
Before Friday, however, the IPO calendar features six more health care offerings, including five biotechs. The IPO window is now open as filing activity picks up and year-to-date returns for the Renaissance IPO ETF recently surpassed the S&P 500.
ReWalk Robotics (RWLK), an Israeli maker of recently-approved (June 2014) exoskeletons that enable paraplegics to walk, became the fifth IPO of 2014 to spike 100% or more in day of trading, and the only IPO since 2000 to do so after pricing below the range. It is the first company with an approved exoskeleton in a multi-billion dollar market for paraplegia, with the potential to address quadriplegia and multiple sclerosis. For post-IPO investors, the company must prove that it can overcome negative gross margins and uncertainty over reimbursement.
| 2014 IPOs with 100% first-day pops | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-day pop | Return at 9/12 |
| Dicerna Pharmaceuticals (DRNA) | Biotech: RNAi therapies | $90 | 25% | 207% | -3% |
| Castlight Health (CSLT) | Health benefits SaaS | $178 | 60% | 149% | -9% |
| ReWalk Robotics (RWLK) | Exoskeletons for paraplegics | $36 | -20% | 113% | 113% |
| Ultragenyx Pharmaceuticals (RARE) | Biotech: Rare genetic diseases | $121 | 36% | 101% | 175% |
| Varonis Systems (VRNS) | SaaS for unstructured data | $106 | 22% | 100% | 6% |
Affimed Therapeutics (AFMD), which develops immunotherapies for lymphomas, leukemia and other cancers, slashed its offer price by 42% and still ended the day down 19%, even after insiders purchased 42% of the deal. Of the 13 biotechs that have been discounted at least 30% below the midpoint this year, Affimed had the worst first-day performance. The company no doubt hoped to follow in the footsteps of June IPO Kite Pharma (KITE), another early-stage immunotherapy cancer biotech, which priced above the range and jumped 71% on its first day.
IPO market snapshot
So far this year, 190 IPOs have raised $40.1 billion and produced an average first day return of 13%. The Renaissance IPO ETF, a float cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 8.1% compared with 7.4% for the S&P 500. Over the last 30 days, the IPO ETF has risen 6.4% compared with 2.7% for the S&P 500, suggesting that the IPO market remains receptive to new issuance. The active IPO pipeline includes 137 companies looking to raise a total of $53 billion.
