Last week, IPO issuers were challenged by investor selectivity and pricing discipline. Half of the week’s eight deals were priced below the range, and three early-stage health care companies postponed their IPOs. Online textbook rental company Chegg (CHGG) had the worst first-day return of the year, falling 23% after pricing above the range. The week’s other e-commerce IPO, zulily (ZU), fared much better, with a 71% first-day gain on Friday. Meanwhile, the Renaissance IPO ETF (symbol IPO), a measure of post-IPO returns, was up 3% for the week, as leading internet and consumer brand companies favored by investors performed well. The year’s IPO count reached 203, the third highest annual count since 2000.
Third consecutive month with 20+ IPOs
Although the three postponements meant a missed chance at back-to-back weeks with 10+ IPOs, November became the third straight month with 20 or more pricings, the longest streak since 2006. With ten deals on the calendar for the week ahead, the monthly count (currently 21) could reach 30 for the third time this year.
The week-leading gain from zulily reflected the young company’s very fast growth (120% in the 3Q13) and impressive profitability ($21 million free cash flow in the 3Q13). Its flash sales site, featuring deals on toys, children’s apparel and infant gear for moms, is used by 2.6 million active customers. While Chegg also has growth potential because of its non-print segment (79% growth in the 3Q13), its print textbook segment has kept overall net income and free cash flow negative.
| IPO pricings (week of November 11, 2013) | ||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | Return as of 11/15 |
| zulily (ZU) | Children's apparel | $253 | 29% | 71% |
| Tandem Diabetes Care (TNDM) | Insulin pumps | $120 | 7% | 46% |
| Houghton Mifflin Harcourt (HMHC) | Educational publishing | $219 | -20% | 34% |
| Extended Stay America (STAY) | Hotel chain | $565 | 3% | 19% |
| Relypsa (RLYP) | Hyperkalemia | $75 | -37% | 10% |
| Dynagas LNG LP (DLNG) | LNG carriers | $225 | -10% | 0% |
| Eros International (EROS) | Indian films | $55 | -31% | 0% |
| Chegg (CHGG) | Textbook rental | $188 | 19% | -27% |
High-end designer Vince and mobile app developer Sungy set terms
Two companies set terms last week. Vince (VNCE), which launched a $180 million IPO, designs high-end apparel for wholesale partners like Neiman Marcus and Saks and for its expanding independent retail locations. Comparable store sales grew 32% in the first half. Sungy Mobile (GOMO) is a top app developer for Android. Its year-to-date revenue increased 84% to $38 million.
| IPOs setting terms (week of November 11, 2013) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Vince (VNCE) | High-end apparel | $180 | $264 |
| Sungy Mobile (GOMO) | Android mobile app development | $74 | $47 |
Two large deals added to the pipeline
Five companies submitted initial filings last week. The largest new deal, for $400 million, came from RSP Permian (RSPP), an oil and natural gas E&P operating in the Permian Basin. Intrawest Resort Holdings (IWR.RC) also filed for a potentially large deal. Acquired by Fortress for $3.1 billion in 2006, it operates seven mountain resorts and a heli-skiing adventure company.
| New IPO filers (week of November 11, 2013) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| RSP Permian (RSPP) | Oil and natural gas E&P | $400 | $103 |
| Intrawest Resort (IWR.RC) | Mountain resorts | $100 | $524 |
| Cypress Energy LP (CELP) | Energy industry disposal | $91 | $329 |
| GeNO Healthcare (GNO) | Nitric oxide treatments | $50 | $0 |
| Semler Scientific (SMLR) | Blood flow measurement | $15 | $2 |
IPO market snapshot
The 203 IPOs in 2013 have raised $48.6 billion and produced an average return of 31%. There have been 73 IPOs in the past 90 days, with total proceeds of $20.2 billion and an average return of 26%. The active IPO pipeline includes 96 companies looking to raise a total of $27.2 billion.
