Despite a downturn in the markets last week, the IPO market surged ahead, with nine deals pricing and two gaining more than 50%. Six of last week’s deals priced above their midpoints and seven traded up from their IPO prices, averaging a 22% gain at market close on Friday. Intrexon (XON), which is developing synthetic biology technologies to improve drugs and food, was the week’s winner, gaining over 82% from its IPO price, while Cvent (CVT), an event management SaaS provider, delivered the best first-day return, trading up over 57% in its market debut Friday. Filing activity slowed down last week, with just two companies setting terms, including Dan Loeb’s Third Point Reinsurance (TPRE), and three companies submitting initial filings.
Intrexon and Cvent soar, ad tech YuMe falls flat
Intrexon's huge gain reflected a bet on the strong track record of Chairman and CEO Randal Kirk. Kirk previously founded and led New River Pharmaceuticals, which was sold to Shire for $2.6 billion in 2007. Cvent's first-day pop followed in the footsteps of successful IPOs from enterprise SaaS peers Textura (TXTR; up 122% from its IPO) and Marketo (MKTO; 166%) earlier this year. Fox Factory Holdings (FOXF), Frank’s International (FI) and MiX Telematics (MIXT) also had strong performances in their first day of trading on Friday; all three priced above the range and posted double-digit first-day gains.
Ad tech company YuMe (YUME) and oil and gas storage MLP World Point Terminals (WPT) delivered the weakest returns of last week's group, both recording slight losses from their IPO prices. Although YuMe addresses the large and fast-growing online video ad market, investors have been hesitant to invest in this new and highly fragmented market. With no clear winners and the threat of Google’s involvement looming, each of the last three ad tech IPOs (Tremor Video, Marin Software and Millenial Media) has fallen from its IPO price. World Point Terminals, LP priced at the midpoint of its range but traded down 2% in its market debut. Despite offering an attractive yield compared to its peers, its small size, dependence on its private parent and lack of transparency into its ownership structure caused some investors to pass on the deal.
| IPO pricings (week of August 5, 2013) | ||||
| Company (Ticker) | Business | Deal Size ($mm) | Price vs. Midpoint | Return |
| Intrexon (XON) | Synthetic biology tech | $160 | 7% | 82% |
| Cvent (CVT) | Event management SaaS | $118 | 17% | 57% |
| Fox Factory Holding (FOXF) | Suspension products | $129 | 7% | 23% |
| Frank's International (FI) | Oil and gas services | $660 | 10% | 20% |
| MiX Telematics (MIXT) | Fleet management SaaS | $101 | 7% | 13% |
| QEP Midstream Partners, LP (QEPM) | Midstream energy assets | $420 | 5% | 6% |
| Stock Building Supply (STCK) | Wood products | $98 | -18% | 3% |
| YuMe (YUME) | Ad tech company | $46 | -31% | 0% |
| World Point Terminals, LP (WPT) | Oil storage terminals | $175 | 0% | -2% |
Dan Loeb’s Third Point Reinsurance follows a hedge fund trend
Third Point Reinsurance, the reinsurance arm of Dan Loeb’s hedge fund Third Point, set terms for a $300 million IPO that is scheduled to price in the coming week. Loeb is not the first hedge fund manager to foray into the reinsurance space as a way to provide his fund with additional investment capital; David Einhorn created Greenlight Capital Re (NYSE: GLRE) in 2004 and took the company public in 2007, and both SAC Capital and Paulson & Co have set up their own reinsurance arms in the past year. Intercloud Systems (ICLD), a global provider of IT infrastructure management services, also set terms. The company is currently traded on the OTC markets and is looking to raise $20 million as it shifts to the NASDAQ.
| IPOs setting terms (week of August 5, 2013) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Third Point Reinsurance (TPRE) | Property and casualty reinsurer | $300 | $397 |
| Intercloud Systems (ICLD) | IT infrastructure services | $20 | $28 |
Two biotechs and a wind energy company join the IPO pipeline
The summer’s wave of biotech IPOs may continue into the fall, as two more biotechs were added to the IPO pipeline last week. Acceleron (XLRN), a clinical-stage biotech developing protein therapeutics for cancer and rare diseases, is looking to raise $75 million and join the ranks of recent successful cancer biotech IPOs from Onconova Therapeutics (ONTX; up 96% from its IPO) and Epizyme (EPZM; 134%). Ruthigen, an early stage biotech developing non-antibiotic therapeutics to prevent and treat infection in surgical procedures, also submitted an initial filing this week and is looking to raise $27 million.
Pattern Energy Group (PATT.RC), which owns and operates eight wind power projects in the US, Canada and Chile, was the largest initial filer last week. The company is looking to raise $345 million and plans to dual list in the US and Canada.
| New IPO filers (week of August 5, 2013) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Pattern Energy Group (PATT.RC) | Wind energy | $345 | $154 |
| Acceleron Pharma (XLRN) | Cancer and rare disease biotech | $75 | $27 |
| Ruthigen (RTGN) | Infection treatment biotech | $27 | $0 |
IPO market snapshot
The 125 IPOs in 2013 have raised $27.1 billion and produced an average return of 31%. There have been 66 IPOs in the past 90 days, with total proceeds of $12.2 billion and an average return of 34%. The active IPO pipeline includes 95 companies looking to raise $33.0 billion.
