Rentech Nitrogen Partners (RNF) and NewLink Genetics (NLNK) both announced terms for upcoming initial public offerings this morning. The two companies are the fourth and fifth companies to file terms with the SEC this month, following Ubiquiti Networks (UBNT), ZELTIQ Aesthetics (ZLTQ), and the highly anticipated Groupon (GRPN).
Rentech Nitrogen Partners L.P., a spin-off of clean energy firm Rentech's nitrogen fertilizer business, plans to raise $300 million by offering 15 million shares at a price range of $19.00 to $21.00. The company was founded in 1965 and booked $176 million in revenues for the twelve months ended June 30, 2011. While many companies are still undecided on whether or not the tides have turned in the global equity market, Rentech can see its opportunity. Rentech hopes to benefit from recent investor interest in yield plays as many investors are looking for more stable returns. The company’s pro forma cash distribution to unit holders for the twelve months ending June 2012 was $1.54 per unit, an implied yield of 7.7% at the midpoint of the initial range. Rentech Nitrogen plans to list their common units on the New York Stock Exchange next week.
NewLink Genetics, a biotech firm developing a Phase 3 drug for surgically-resected pancreatic cancer patients, plans to raise $61 million by offering 5.5 million shares at a price range of $10.00 to $12.00. Backed by Iowa-based seed genetics firm Stine Seed Company, NewLink has yet to generate any revenues and has incurred heavy losses to date ($18m over the past 12 months). NewLink is the first biotechnology company to hit the IPO calendar since late July. The five biotech companies that held initial public offerings in the past twelve months are currently up an average of 8% from their offer (two trading up, three trading down). Additionally, due to the high-risk connotation associated with the biotech sector, all five of them have been forced to price below their initial offer range to generate investor interest. Along with Rentech, NewLink Genetics is hoping to take advantage of the market’s recent turnaround. Fellow health care company ZELTIQ Aesthetics completed its IPO last week and has been greeted with a warm reception by investors. NewLink Genetics plans to list on the NASDAQ the week of November 7th.
The US IPO market has rallied ahead of the broader equity market so far this quarter, with the FTSE Renaissance US IPO Index up 12.7% this month compared to the 9.8% return of the S&P 500 over the same period. The recent recovery in aftermarket performance in addition to the performance of recent IPOs (UBNT and ZLTQ; +26.9% and +13.9% respectively from their IPO price) offers encouraging signs for new issues to come. It seems that last quarter's icy landscape for IPOs is beginning to defrost as issuance heats up.
(Note: All return information is taken as of October 26, 2011 at 4pm EST.)
