The week of Alibaba's $22 billion IPO kicked off with a broken LBO and a high flying biotech. Prostate cancer biotech Tokai Pharmaceuticals (TKAI) closed 58% above its offer price by the end of Wednesday, while Civitas Solutions (CIVI) broke issue. This follows Friday's trading, where ReWalk Robotics (RWLK) spiked 113% and Affimed Therapeutics (AFMD) fell 10%.
Tokai Pharmaceuticals benefited from high insider buying, as Novartis and others invested $42 million on the IPO (43% of the float). Like ReWalk, Tokai had unusually high trading volume (3x the float). Additionally, Tokai priced the morning it began trading. So far this year, 53 biotechs have gone public and only half trade above the IPO price. Another biotech, rEVO Biologics (RBIO), was expected to begin trading today but pushed back its IPO.
Vestar-backed Civitas Solutions, a non-institutional care provider for the developmentally disabled, ended Wednesday below its offer price, the 8th LBO to do so this year (out of 21). Investors may have been turned off by high levels of debt and well-compensated insiders.
| The biotech IPO pops and the LBO drops | ||||
| Company (Ticker) | Business | Deal Size ($mm) |
IPO Price vs. Midpoint | Return at 9/17 |
| Tokai Pharmaceuticals (TKAI) |
Biotech: Small molecule for prostate cancer |
$76 | 7% | 58% |
| Civitas Solutions (CIVI) | Care for the developmentally disabled | $252 |
-21% | -2% |
Many deals continue to join the IPO calendar, including large offerings from VWR (VWR), CONE Midstream Partners LP (CNNX), Vantage Energy (VEI), Atento (ATTO) and Travelport (TVPT). The Renaissance IPO ETF (NYSE: IPO) trades around 2014 highs, suggesting we may see heavy deal flow well after the Alibaba (BABA) IPO.
