GoDaddy went public this week and performed better on its debut than any LBO from 2014.
As we note in our new 1Q 2015 Quarterly Review, the first quarter slowed considerably - particularly in technology names - but GoDaddy's 33% gain is an encouraging sign for the sector. It and Kornit Digital had the year's fifth- and fourth-best first day pops, respectively.
Who's your daddy? GoDaddy up 33%
GoDaddy proved it was Earl of URLs and master of its domains this week when it priced an upsized IPO above the range at $20 per share, then traded up 33%. Raising $460 million, it is the first LBO'd IPO of 2015 and the third-largest of the year. None of 2014's 30 LBOs priced above the range, and the group's highest first-day pop was +15% (from IMS Health; IMS), or half of what GoDaddy saw on Wednesday trading. Not since 2004 has a tech LBO spiked 30% on its debut.
Buyout firms KKR, Silver Lake and TCV loaded the company with floating-rate debt, which poses a risk as the Fed considers hiking interest rates. However, its well-known brand, dominant market position, high cash flow ($1.4 billion sales in 2014) and strong growth (23% year-over-year) brought investors on board. GoDaddy manages 20% of global website domains, and plans to grow by selling those customers additional web services.
Kornit Digital inks $71 million IPO and gains 40%
Kornit Digital raised $71 million after slashing its IPO price from the proposed $14 down to $10. It then traded up 40% to $14. Aside from the biotech bettors, IPO investors continue to demonstrate scrutiny toward companies in unproven markets. Based in Israel, Kornit sells inks and digital machines that print designs on t-shirts and other apparel. Similar to GoDaddy's strategy, Kornit gets its foot in the door with the equipment and then seeks higher margins with branded inks. It has grown at a 30% CAGR since 2012 and plans to roll out a new roll-to-roll machine, providing it a much larger market opportunity.
Two IPOs stay delayed
Two more IPOs had been scheduled but failed to price this week. MRI systems maker ViewRay (VRAY) again pushed back its IPO. Already six medical products and diagnostics companies have postponed their offerings this year, and ViewRay could be the seventh if it cannot find a price the public market will pay. Wowo (WOWO) once known as the "Groupon of China", has been targeting an IPO for the past month. This week, it lowered its deal size, removed its "best efforts" status and disclosed that the owners would only pursue an IPO if it could be completed by April 15 and with a pre-IPO market cap of over $250 million.
| IPO pricings (week of March 30, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | 1st-day Pop | Return as of 4/2 |
| Kornit Digital (KRNT) |
Textile printing |
$71 | -29% | 40% | 40% |
| GoDaddy (GDDY) | Web domains and hosting | $460 | +11% | 31% | 33% |
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IPO market snapshot
The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, has traded up over 6% year-to-date, compared to 0% for the S&P 500. This suggests that the IPO market remains open to new issuance heading into the 2Q 2015. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (TWTR), Alibaba (BABA), Hilton (HLT), Ally Financial (ALLY) and Voya Financial (VOYA). To find out if this is the best ETF for you, visit our IPO investing page.
