Three small and discounted IPOs priced last week, but nothing set terms ahead of the long holiday weekend. However, the past Monday and Tuesday saw eight companies join the IPO calendar for next week, as a result of both the small backlog that built up and the perception of an open IPO window. Only one has over $100 million in annual revenue. The largest by market cap, TerraForm Power (TERP), is a solar energy dividend play carved out of SunEdison (SUNE). All but one (Roka Bioscience, ROKA) are set to price on Thursday, July 18.
For new IPO filings, the four-day week before Independence Day did not see slower activity as 15 companies filed, with two more added to the pipeline so far this week. Biotechs continue to pack the pipeline (six since last Monday), suggesting the sector's breakout levels could remain high as we enter the third quarter.
Two largest: Solar energy spinoff and pet insurance company
TerraForm Power, expected to raise $401 million at a $2.0 billion valuation, will be SunEdison's second spinoff this year, following the IPO of SunEdison Semiconductor (SEMI) in May (up 34% from its IPO). Close peers NRG Yield (NYLD) and Abengoa Yield (ABY) have traded well, with NRG up a total of 130% since its July 2013 IPO and Abengoa up 29% since June 2014 after both priced above the range. The week's second largest deal to set terms so far this week was Seattle-based Trupanion, a fast-growing medical insurance provider for cats and dogs. While Obamacare's insurance mandate does not extend to cats and dogs, companies like Trupanion (TRUP) benefit from rising veterinary costs and the capability to perform complex procedures, along with consumers' willingness to spend more on their pets (2013 biotechs Aratana (PETX) and Kindred (KIN), sales growth in organic pet food).
Tech-related: One adtech SaaS provider and one IT outsourcing firm
Globant (GLOB), which offers businesses outsourced IT work using its team of cloud, mobile and big data specialists, set terms to raise $76 million after spending nearly one year on file. The Argentina-based company generates 80% of revenue from North American clients, which include Google (GOOGL), LinkedIn (LNKD), Verizon (VZ) and Sabre (SABR). TubeMogul (TUBE) provides an automated platform for companies to manage online video ad campaigns, but will also carry out the online video advertisement objectives for larger customers. TubeMogul indicated that 27% of the deal may be covered by insider buying, which could be necessary given that close peers YuMe (YUME) and Tremor Video (TRMR) have traded down about 20% and 30% YTD, respectively.
Health care: Two biotechs, one diagnostic company and one lab equipment maker
Roka Bioscience (ROKA), an early-stage maker of laboratory equipment that uses molecular diagnostics to test for pathogens (like salmonella) in food, is targeting a $75 million deal size, or about 28% of its diluted market cap. Insiders, which include OrbiMed, NEA, TPG and Fidelity, plan to purchase $15 million on the offering. CareDx (CDNA) sells molecular diagnostic tests to monitor heart transplant patients, and has come back to the IPO market after originally filing to raise $86 million in 2007 and withdrawing one year later. Its well-known backers include KPCB, TPG, Credit Suisse's Sprout Capital and Intel. Iradimed (IRMD), a microcap maker of non-magnetic MRI-safe IV infusion pumps, set terms this morning to raise $10 million, but has not selected a pricing date.
Sage Therapeutics (SAGE), the largest of the four health care companies by market cap, is in Phase 1/2 trials for an adjunct therapy to treat a rare and deadly state of persistent seizure. It is primarily backed by Third Rock Ventures, but Arch and Fidelity also have significant stakes. Last, Pfenex (PFNX) is an early-stage biotech developing a biosimilar version of Roche's lucrative treatment for wet AMD, Lucentis. In 2009, the company was spun out of Dow Chemical, the largest current shareholder, to develop its protein therapy platform. Amphastar (AMPH), which went public in late-June, is also developing biosimilars of commercially successful drugs, but Pfenex's market is much larger. Amphastar's stock has traded up 29% from its heavily discounted IPO price; it is still below the original range.
| IPO terms filings since Monday | ||||
| Company (Ticker) | Business | Deal Size ($mm) | Market Cap ($mm) | LTM Sales ($mm) |
| TerraForm Power (TERP) | Spinoff of SunEdison solar assets | $401 | $2,062 | $26 |
| Trupanion (TRUP) | Medical insurance for cats and dogs |
$100 | $429 | $92 |
| Globant (GLOB) | Argentina-based outsourced IT provider | $76 | $400 | $167 |
| TubeMogul (TUBE) | SaaS platform for digital video ads | $75 | $394 | $64 |
| Roka Bioscience (ROKA) | Food safety testing equipment | $75 | $272 | $3 |
| Pfenex (PFNX) | Biotech: Version of Roche's Lucentis | $65 | $198 | $11 |
| Sage Therapeutics (SAGE) | Biotech: Life-threatening seizures | $60 | $382 | $0 |
| CareDx (CDNA) | Molecular diagnostics for heart transplants | $50 | $175 | $23 |
| Iradimed (IRMD) | MRI-safe IV infusion pumps |
$10 | $64 | $12 |
17 companies have submitted initial filings since last Monday. Health care companies dominate the list, including five biotechs, a small diagnostics company and Diplomat, a large independent specialty pharmacy. Energy companies also made a strong showing with four filers that included two E&Ps (one large and one small), a marine oil and gas storage spinoff and a major offshore oil well appraiser. There were three technology filers, including a Chinese mobile game publisher and two cloud companies that are both expected to raise $75 million - Yodle (YO) and Yodlee (YDLE). The largest new addition to the IPO pipeline was Zayo Group, which owns a large bandwidth infrastructure network composed of fiber optic cables, and could raise $500 million or more. OM Asset Management (OMAM), a spinoff of London-based insurer Old Mutual with over $200 billion AUM, has received media attention for its IPO that could raise over $250 million.
| IPO initial filings (since June 30, 2014) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Zayo Group Holdings (ZAYO.RC) | Fiber optic bandwidth infrastructure | $500* | $1,088 |
| Expro Oilfield Services (XPRO.RC) | Offshore oil well flow management and appraisal | $400* | $1,385 |
| Vantage Energy (VEI) | Oil and gas E&P in the Marcellus Shale |
$400 | $72 |
| OM Asset Management (OMAM) | Asset management arm of insurer Old Mutual | $250* | $542 |
| Albea (ALBE.RC) | Plastic packaging for beauty products | $150 | $1,553 |
| Hoegh LNG Partners LP (HMLP) | Höegh LNG spinoff owning floating storage and regasification units | $150 | $41 |
| iDreamSky Technology (DSKY) | Chinese mobile game publisher | $115 | $65 |
| Diplomat Pharmacy (DIP.RC) | Fourth largest specialty pharmacy in the US | $100 | $1,637 |
| Avalanche Biotechnologies (AAVL) | Biotech: gene therapy for wet AMD | $86 | $0 |
| Auris Medical Holding (EARS) | Biotech: treatments for inner ear disorders | $86 | $0 |
| Yodle (YO) | Online marketing platform for small businesses |
$75 | $172 |
| Yodlee (YDLE) | SaaS platform for businesses to develop financial apps | $75 | $74 |
| Viamet Pharmaceuticals Holdings (VIAM) | Biotech: fungal disease protein therapeutics | $75 | $2 |
| T2 Biosystems (TTOO) | Developing diagnostics for sepsis and hemostasis | $69 | $0 |
| Loxo Oncology (LOXO) | Biotech: small molecule treatments for solid tumors | $69 | $0 |
| Viking Therapeutics (VKTX) | Biotech: diabetes and other disorders | $58 | $0 |
| Imperial Resources (EEH) | Appalachian Basin E&P spun out of Empire Energy | $20 | $24 |
IPO market snapshot
So far this year, 148 IPOs have raised $31.5 billion and produced an average first day return of 13%. The Renaissance IPO ETF (symbol: IPO), a cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 1% compared with 6% for the S&P 500. Over the last 30 days, the IPO ETF has risen over 1% compared with less than 1% for the S&P 500, suggesting that the IPO market is likely receptive enough to new issuance for high deal flow to continue. The active IPO pipeline includes 142 companies looking to raise a total of $52.3 billion.
