US IPO Recap: Market picks up the pace with ten IPOs, six price below the range

Deal flow picked up last week with ten IPOs pricing and raising almost $1.9 billion in proceeds. Though it was a strong week for pricings, six of the ten deals slashed their valuations in order to complete their offerings, and all five deals that priced on Wednesday did so below their original range, the most deals to price below the range in a single day since June 9, 1998. Last week’s top performing deal came from fast-casual restaurant Noodles & Company, which gained 104% on its first day of trading, the best first-day gain since Splunk jumped 109% in April 2012. Last week’s activity brought June’s IPO total up to 18, and the 2Q13 total up to 61, the most IPOs in a quarter since the 70 in 4Q07 (view our 2Q 2013 US IPO Review). No deals set terms last week, but six companies submitted initial filings, including Neiman Marcus (NMNM.RC), Burlington Coat Factory (BH.RC) and CBS's outdoor advertising division (COA.RC).

Ten deals price, but market volatility pushes valuations down
Last week was only the third week since 2007 to have ten or more IPO pricings, but six of those ten had to price below their proposed ranges in order to complete their offerings. The valuation pressure may have reflected the heightened volatility in the markets. In the previous week and again last Monday, the VIX volatility index closed above 20 for the first time in 2013. Although HD Supply (HDS) raised $957 million in the fourth largest IPO of 2013 (behind ZTS, VOYA, and COTY), it had to reduce its IPO price to $18, 23% below the proposed midpoint of its original $22 to $25 range. CDW (CDW), a leading reseller of IT products and solutions and last week’s second largest deal, raised $395 million, after retreating from its original $20 to $23 price range to a $17 IPO price. One company, GDC Technology (GDCT), postponed its offering, as questions over the remaining market for its digital cinema servers overshadowed a track record of fast growth.

Noodles & Company delivered last week’s top return, gaining 104% in its market debut. The fast-casual restaurant chain, led by former Chipotle executives, priced its shares at $18, well above its original range of $13 to $15. It recorded the best first-day gain since Splunk (SPLK) gained 109% on its first day of trading in April 2012.

Six new companies file, two high profile retailers added to the pipeline
In the wake of last week’s pricings and in anticipation of the fourth of July holiday, IPOs on the calendar have decreased going into July. However, the IPO pipeline has remained active, and six new companies submitted initial filings last week. Two high profile national retailers, Neiman Marcus and Burlington Coat Factory, submitted initial filings; both are backed by large PE firms (Warburg Pincus and TPG control Neiman Marcus, while Bain Capital owns Burlington Coat Factory) that acquired the companies in the pre-recession leveraged buyout boom. While Neiman Marcus filed with a proposed deal size of $100 million, the figure is likely just a placeholder, and we estimate that the IPO will raise at least $750 million. Other notable new filers include CBS Outdoor Americas, a spin-off of CBS Corporation’s (NYSE: CBS) North & South American outdoor advertising business unit, SFX Entertainment (SFXE), the largest producer of live electronic music events founded by media mogul Robert Sillerman, Marlin Midstream Partners (FISH), which owns and operates midstream natural gas assets, and Ardmore Shipping (ASC), which provides seaborne transportation of petroleum products and chemicals.

IPO market snapshot
The 92 IPOs in 2013 have raised $20.6 billion and produced an average return of 22%. There have been 61 IPOs in the past 90 days, with total proceeds of $13.0 billion and an average return of 21%. The active IPO pipeline includes 112 companies looking to raise $33.3 billion.