The year's first software IPO, Varonis Systems (VRNS), gained 100% on the first day of trading after pricing 22% above the midpoint of the original range. It marked the third IPO this year to have a 100% or greater first-day return after Dicerna (DRNA) and Ultragenyx (RARE) at the end of January. In 2013, the first IPO to have a 100% pop on its debut was Noodles & Company (NDLS) at the end of June. Through February, 2014 has considerably surpassed the prior year period in terms of filings (55 vs. 21), offerings (37 vs. 20) and proceeds ($7.0 billion vs. $5.5 billion). Two of the week's major stories involved private equity, namely Diamond S Shipping’s launch (DSG) and GrubHub’s initial filing (GRUB). Biotechs, which have been 43% of YTD offerings, accounted for five new launches and three new filers. Last week also saw two previously withdrawn IPOs refile (Everyday Health (EVDY) and Radius Health (RDUS)).
100% first-day jump for Varonis bodes well for coming tech wave
Varonis (VRNS) raised $106 million in just the second technology IPO of the year. Its software provides greater data security by allowing enterprises to analyze and control internal human-generated unstructured data, such as word files, spreadsheets, presentations and digital media. Several more enterprise software IPOs, such as Paylocity (PCTY) and Borderfree (BRDR), are expected in the coming months. Together with Facebook's February 19 purchase of WhatsApp for $19 billion, the performance of Varonis has broad implications for the industry, and it may open the floodgates for a mounting number of tech companies in the pipeline or encourage others to file for an IPO.
| IPO pricings (week of February 24, 2014) | ||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | Return as of 2/28 |
| Varonis Systems (VRNS) | Software that manages human-generated unstructured data | $106 | 22% | 100% |
| Lumenis (LMNS) | Laser-based systems used in medical procedures | $75 | -25% | 2% |
Diamond S Shipping and Coupons.com set terms
Last week's IPOs setting terms included oil tanker company Diamond S Shipping Group (DSG), digital coupon platform Coupons.com (COUP), and five biotechs. Diamond received $600 million in a funding round led by WL Ross (23% post-IPO stake) in August 2011. The company, which is expected to raise $210 million and price next week, controls the second largest number of midrange oil tankers and plans to increase its fleet by about 30% during the next two years. Coupons.com is expected to raise $130 million and price this week. It would be the third tech IPO of the year, and its 50% year-over-year revenue growth and recent swing into positive adjusted EBITDA should attract investors' attention. The three weeks of heavy biotech activity from January 27 to February 14 saw a trend of declining average returns, but the five biotechs added to the calendar will hope the sector’s IPO window has stayed open.
| IPOs setting terms (week of February 24, 2014) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Diamond S Shipping Group (DSG) | WL Ross-backed oil tanker operator | $210 | $178 |
| Coupons.com (COUP) | Digital coupons for consumer packaged goods | $130 | $168 |
| Achaogen (AKAO) | Biotech: antibiotics for multi-drug resistant infections | $65 | $19 |
| Aquinox Pharmaceuticals (AQXP) | Biotech: treatments for inflammation and cancer | $41 | $0 |
| Galmed Pharmaceuticals (GLMD) | Biotech: therapies for liver diseases and gallstones | $31 | $0 |
| Dipexium Pharmaceuticals (DPRX) | Biotech: topical antibiotic for diabetic foot ulcers | $30 | $0 |
| Microlin Bio (MCLB) | Biotech: microRNA cancer diagnostics and therapeutics | $25 | $0 |
GrubHub grabs headlines after an initial filing
GrubHub (GRUB) filed for a $100 million IPO on Friday. The company's well-known restaurant delivery services, GrubHub and Seamless, had 3.4 million unique users at the end of 2013 following GrubHub and Seamless' merger in August. Another popular Internet company, Everyday Health (EVDY; 43 million monthly users), refiled to go public after it withdrew in November 2010. Its business model changed noticeably in the interim as the company secured more ad revenue by attracting non-paying users. Radius Health (RDUS), which develops injectable treatments and wearable patches to restore bone density in osteoporosis patients, also refiled for an IPO after it withdrew in November 2012. The refilings coincide with all-time highs last week for the S&P 500, Russell 2000 and the FTSE Renaissance Global IPO Index. Including Radius, three new biotechs submitted initial filings, further padding the pipeline with this year's most active sector.
| New IPO filers (week of February 24, 2014) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Everyday Health (EVDY) | Publishes health and wellness media | $115 | $156 |
| GrubHub (GRUB) | Online portal for food delivery | $100 | $137 |
| Tarena International (TEDU) | China's largest IT education provider | $100 | $93 |
| Radius Health (RDUS) | Osteoporosis biotech restoring bone density | $86 | $0 |
| SCYNEXIS (SCYX) | Biotech fighting fungal infections | $55 | $17 |
| ETRE REIT (ECAV) | REIT owning a Washington, D.C., office building | $53 | $7 |
| Ignyta (RXDX) | Biotech developing targeted cancer therapeutics | $40 | $0 |
IPO market snapshot
So far this year, the Renaissance IPO ETF, a basket of newly public companies that trades under the symbol IPO, has gained 8%. The 37 IPOs in 2014 have raised $7 billion and produced an average return of 32% from the IPO price. There have been 50 IPOs in the past 90 days, with total proceeds of $12.5 billion and an average return of 39% from the IPO price, and a post-IPO return of 14%, as measured by the Renaissance IPO ETF. The active IPO pipeline includes 107 companies looking to raise a total of $27.3 billion.
