Only two companies completed initial public offerings this past week and both ended the week about 1% from the IPO price.
Ear disease biotech Otonomy (OTIC) priced at the high end of its range and gained 7% on the first day, but settled to just 1% above the IPO price at Friday close. It follows the IPO of last week's Auris Medical (EARS), which slashed its offer price by 46% and has traded up 9% as of Friday. Although Otonomy did not spike, pricing at the high end and ending the week up confirms that the window for biotech IPOs, the most active sector of 2014, is still open.
C1 Financial (BNK), a Florida bank with 29 locations and over $1.4 billion in assets, is the latest bank IPO of 2014 to fall flat. The company priced below its range and was propped up to a 0% return by the end of its first day, but ended the week down 1%. Recent Florida-based bank IPO FCB Financial (FCB) also priced below its range and trades below the IPO price. Of the 9 bank IPOs of 2014, only last week's Texas-based Green Bancorp (GNBC) has returned over 10%.
Uptick in performance indicates an active September
Year-to-date, IPOs have gained an average of 12% from the IPO price, but post-IPO return is 0%. This is an improvement from last week's 10% average total return with -2% in post-IPO follow through. Like broader indices, the IPO market in 2014 has failed to match last year's performance, which by mid-August had seen a 29% average return, including 13% in IPO aftermarket.
Using the Renaissance IPO ETF (symbol: IPO) as a proxy for IPO performance, mid August has recovered from the modest selloff that began in July. This bodes well for the IPOs in the pipeline, including the highly-anticipated public offering of Alibaba (BABA), which could arrive in the week after Labor day..
| IPO pricings (week of August 11, 2014) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-day pop | Return as of 8/15 |
| Otonomy (OTIC) | Biotech: Ear disease therapies | $100 | 7% | 7% | 1% |
| C1 Financial (BNK) | Florida bank with 29 branches | $45 | -11% | 0% | -1% |
Two IPOs pushed back, again
Zosano Pharma (ZSAN) and GWG Holdings (GWGH) were delayed another week, with both now on the calendar for next week. Zosano, a biotech developing transdermal patches to treat osteoporosis, is expected to raise $70 million with a fully diluted market cap of $139 million. The company no doubt hopes to draw more comparisons between it and fellow osteoporosis biotech Radius Health (RDUS, up 57% since June IPO) instead of fellow patch maker Corium International (CORI, down % since April IPO).
GWG, which holds a portfolio of life insurance policies, filed an amendment that dropped its deal size to $13 million (down 38%) and market cap to $76 million (down 32%). The company also replaced its lead underwriter.
IPO market snapshot
So far this year, 189 IPOs have raised $40.6 billion and produced an average first day return of 13%. The Renaissance IPO ETF, a float cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 2.9% compared with 5.8% for the S&P 500. Over the last 30 days, the IPO ETF has risen 2.2% compared with -0.9% for the S&P 500, suggesting that the IPO market remains receptive to new issuance. The active IPO pipeline includes 111 companies looking to raise a total of $44.6 billion.
