In the last week of October, no companies filed for an IPO.
October was a difficult month for IPOs: 16 companies went public, pricing an average of 22% below their midpoint. Despite the massive valuation cuts, the average IPO return was just 3.4%, while the return on the S&P 500 in the month was 8.3%. However, 30 companies did file for an IPO in October, possibly indicating a stronger end to the year.
The technology sector, which was largely absent in the third quarter, saw three companies, Pure Storage (PSTG), CPI Card Group (PMTS), and Adesto Technologies (IOTS), go public in October. The three deals priced an average 32% below the midpoint, but they have returned 11% since then. Biotech companies faced similar pricing pressure (25% below the midpoint) this month, but returns were worse, essentially flat. One tech company and two biotech companies hope to price their IPOs next week.
In it for the long-haul
With a technological advantage rooted in its proprietary version of Raman amplification, Xtera Communications (XCOM) believes it has solved the operational challenges that formerly hurt Raman adoption and believes that its products offer service providers a cost-effective way to respond to bandwidth constraints. In August 2015, competitor Ciena (NYSE: CIEN) acquired Cyan for about $415 million (net of cash acquired), and Infinera (Nasdaq: INFN) acquired Transmode for $350 million. Xtera Communications is set to raise $55 million at a valuation of $183 million (roughly 23% higher than its August 2015 valuation of $104 million, based on a stock purchase agreement).
IPO on a blind date
Founder-led and Novartis-backed GenSight Biologics (GNST) is developing gene therapies for rare retinal diseases that cause blindness. Lead candidate GS010 is designed to be a one-shot cure for Leber hereditary optical neuropathy and the company expects to begin pivotal Phase 3 trials in the 4Q15. However, no gene therapies have ever been approved in the US. The company hopes to raise $65 million by offering shares at $14, an 81% premium to its last private round. That price could come down, especially considering that eight out of the last nine biotechs have priced below their respective ranges.
Kura Oncology (KURA), which listed on the OTCQB through a reverse merger, looks to raise $60 million next week in an uplisting to the Nasdaq. The company is located in Johnson & Johnson’s San Diego-based biotech incubator, Janssen Labs. It is developing protein inhibitors for solid tumors and blood cancers and has begun Phase 2 clinical trials for lead candidate tipifarnib.
| Renaissance Capital's IPO Calendar - Week of 11/2/2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Lead Manager(s) |
| GenSight Biologics Paris, France |
GNST Nasdaq |
$65 | $13.00 - $15.00 4,650,000 |
Leerink Partners Evercore ISI Canaccord Genuity |
| Developing gene therapies for rare retinal diseases. | ||||
| Kura Oncology La Jolla, CA |
KURA Nasdaq |
$60 | $16.00 - $16.00 3,750,000 |
Citi Leerink Partners |
| Developing in-licensed protein inhibitors for solid tumors and blood cancers. | ||||
| Xtera Communications Allen, TX |
XCOM Nasdaq |
$55 | $9.00 - $11.00 5,500,000 |
Needham & Co. Cowen & Company BMO Capital Markets |
| Provides optical transport systems for long-haul terrestrial/submarine networks. | ||||
| First Guaranty Bancshares Hammond, LA |
FGBI Nasdaq |
$16 | $21.00 - $21.00 750,000 |
Sandler O'Neill |
| Louisiana bank with 21 branches and $1.5 billion in assets. | ||||
IPO Pipeline Update: No new filers this week
Even with no initial filings this week, October’s 30 filings is tied with 2013 as the most active October in the last ten years. We note that companies that hoped to price their IPOs before Thanksgiving would have needed to file already. Voyager Therapeutics (VYGR), which has similar backers to recent IPO MyoKardia (MYOK), set terms this week but has not set a pricing date for its $86 million IPO. Several companies updated their filings in anticipation of their IPOs, including high-growth craft brewer Ballast Point Brewing Company (PINT), which is looking to raise $173 million. Jack Dorsey’s Sqaure (SQ) also disclosed financials for the 3Q15. loanDepot (LDI) also updated its filing, announcing various agreements and insider buyers for an IPO that we estimate could raise up to $200 million.
IPO Market Snapshot
154 IPOs have raised $28.1 billion in 2015, but only 38% are trading above their IPO price. The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 5% year-to-date, compared to +1% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Twitter (TWTR) and Hilton Worldwide (HLT). The Renaissance International IPO Index is down 3% year-to-date, in line with the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Recruit Holdings and Samsung C+T.
