Hortonworks (+65%), LendingClub (+56%) and New Relic (+48%) all had strong debuts in a week with six tech IPOs, the most in a week since 2000. The three 40%+ first-day pops were the most in a week since September 2013, when FireEye, Rocket Fuel and Benefitfocus all gained 80%+ (only FireEye remains above its offer price). While the three top performers all priced above the range, the remaining six IPO pricings were all at or below the midpoint.
Hortonworks, LendingClub and New Relic take off
Hortonworks (HDP) was the week's best performing IPO, gaining 65% on Friday after pricing 23% above the midpoint. Formed by a group of Yahoo! engineers in 2011, Hortonworks provides support for Hadoop, an open-source software framework used to manage data. Although the company is growing faster than 100% annually, it has lost $87 million this year through September.
LendingClub (LC) completed the week's largest deal, raising $870 million after pricing above its upwardly revised price range. The peer-to-peer lending marketplace is the first IPO out of a group of online alternative lenders looking to go public. On Deck Capital (ONDK), a lender to small businesses, is scheduled to price next week.
Like LendingClub, New Relic (NEWR) also priced above a raised price range, bringing in $115 million and gaining 48% on its first day of trading. Its software, which identifies pain points in software products, was used to help fix HealthCare.gov after its botched rollout and now has more than 10,000 users, including Tableau, GoPro and salesforce. Revenue grew 79% in the third quarter.
Remaining tech deals meet resistance
Chinese app developer Momo (MOMO) had a strong first day, rising 26%, but fell 11% on Friday to close the week with a 12% total return. The location-based meeting app, similar in concept to Tinder, is used by 60 million monthly active users and benefits from partnerships with Alibaba and 58.com.
Connecture (CNXR) priced at the largest discount this week, selling 6.6 million shares at $8, far below the $12-$14 price range. Though its health insurance distribution software is used by several major customers, including Medicare.gov, relatively low gross margins (40% in the third quarter) and the recent loss of a contract with Maryland may have weighed on sentiment.
Workiva (WK) suffered a 2% decline on Friday. Its suite of data-linked applications is used by 2,100 customers, including Coca Cola, Wal-Mart and Google, but the high market share of its SEC filings product could limit future growth.
Non-tech IPOs price down and struggle
James River Group Holdings (JRVR), Metaldyne Performance Group (MPG) and Avolon (AVOL) all priced below the range and posted returns of 1%, 1% and -8%, respectively. James River is a specialty insurer and reinsurer that was taken private in 2007 by D.E. Shaw, Goldman Sachs and others. Metaldyne is a combination of three companies acquired over the last three years for a combined $2.3 billion by American Securities. Avolon, the week's worst-performing IPO, leases a portfolio of mostly narrowbody aircraft to American Airlines and 48 other customers.
| IPO pricings (week of December 8, 2014) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-Day Pop | Return as of 12/12 |
| Hortonworks (HDP) | Software support for Hadoop | $100 | 23% | 65% | 65% |
| LendingClub (LC) | Peer-to-peer lending | $870 | 36% | 56% | 65% |
| New Relic (NEWR) | Cloud-based software analytics | $115 | 21% | 48% | 48% |
| Momo (MOMO) | Chinese meeting and messaging app | $216 | 0% | 26% | 12% |
| Connecture (CNXR) | Health insurance distribution software | $53 | -38% | 10% | 10% |
| James River Group Holdings (JRVR) | Excess and surplus insurance | $231 | -9% | 1% | 1% |
| Metaldyne Performance Group (MPG) | Powertrain and vehicle safety components | $150 | -23% | 1% | 1% |
| Workiva (WK) | SEC filing software | $101 | 0% | -2% | -2% |
| Avolon Holdings (AVOL) | Aircraft lessor | $273 | -9% | -8% | -8% |
Renaissance Capital issued institutional Pre-IPO Research on these IPOs prior to pricing.
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IPO market snapshot
So far this year, 271 IPOs have raised $84 billion, averaging a first-day pop of 13%. The final IPOs of 2014, a group of six companies looking to raise just over $1 billion, will try to price next week. The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, has gained 4% year-to-date. Renaissance Capital's IPO ETF tracks the index, and its top holdings include Alibaba (BABA), Zoetis (ZTS), Twitter (TWTR), Hilton (HLT) and Workday (WDAY).
