Blackstone's Summit Materials gained 17%, paving the way for more PE-backed IPOs in 2015.
IPO highlights during the week of March 9, 2015:
• Constructive pricing leads to successful IPO of construction materials company
• Filing activity picked up, adding life (sciences) to the IPO calendar
• IPOs down 40% from 2014, but up 22% from 2013
Summit climbs 17%
A play on the recovering US construction market, Summit Materials (SUM) priced at the midpoint and traded up 17%. The Blackstone-backed consolidator is the first Capital Goods IPO of the year. Summit boasts an impressive market position and a management team that successfully executed a similar strategy at construction supply company CRH (NYSE: CRH). IPO investors likely expect executives to manage debt (4.8x LTM EBITDA) and weather any cyclical downturns.
Blackstone's last IPO, Vivint Solar (VSLR), gained 35% this week on earnings, but is still 27% below its October 2014 offer price. The buyout firm is also behind PGI Specialty Materials (PGIS.RC), which could launch an IPO in late April.
| IPO pricings (week of March 9, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-Day Pop | Return as of 3/13 |
| Summit Materials (SUM) | Provides aggregates, concrete and paving | $400 | 0% | 17% | 17% |
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IPO activity down but not out
There have been 28 IPOs initial public offerings in 2015, a 40% decline from this point in 2014, due to 11 fewer health care and 5 fewer energy IPOs. We also won't see the spike in technology that occurred in late March and early April last year. Despite the sector's comparably lower activity, health care makes up over half of 2015 IPOs, and continues to dominate new filings.
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 nearly 6% year-to-date, compared to -1% for the S&P 500. The IPO market remains open to new issuance. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (TWTR), Zoetis (ZTS), Alibaba (BABA), Hilton (HLT) and Ally Financial (ALLY). To find more about purchasing shares of the ETF from your broker, visit our IPO investing page.
