The first two IPOs of 2015 both priced below the range and broke issue in early trading Friday. Wisconsin-based County Bancorp recovered to an 8% gain, but insurance services provider Patriot National ended the day down 4%. Last year's finance IPOs average a -1% return from the IPO price. The week's largest scheduled deal postponed its IPO, highlighting the continued pressure investors exercise on valuations.
Recent IPO performance tumbled alongside broader markets this past week as the average returns for IPOs in the past 90 days fell 9 percentage points to +21%, with 63% trading above issue, down from 75% one week ago. The IPO market's slow start could soon pick up as a number of IPO filers in late December become eligible to go public. The reception of Box's (BOX) highly-anticipated IPO next week should indicate interest in the tech sector.
County Bancorp (ICBK) priced $0.25 below the range and traded up to its original midpoint of $17 by the end of the week. With $700 million in assets, the Wisconsin bank focuses on lending to dairy-related businesses. Like last year's top-performing bank, Anchor BanCorp Wisconsin (ABCW; +33%), County Bancorp likely benefited from a relatively strong state economy, in addition to its low efficiency ratio.
Patriot National (PN) priced 18% below the midpoint and ended the day down 4%. The company previously filed to go public in 2010 but postponed and later withdrew. While its workers' compensation brokerage and administration services business produces stable revenue under fee-based contracts, the company has significant related party revenue and customer and geographic risk.
Mortgage REIT Sutherland delays IPOs
The first deal on the 2015 IPO calendar was also the first to postpone its offering. Sutherland Asset Management (SLD), a mortgage REIT focused on small balance commercial loans and MBS, had planned to raise $125 million at a $592 million market cap ($1.3 billion enterprise value). Sutherland originally filed to IPO in 2009, but postponed its offering. Last year, 35 companies had already gone public before the first postponed.
| IPO pricings (week of January 12, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-Day Pop | Return as of 1/16 |
| County Bancorp (ICBK) | Wisconsin dairy bank | $19 | -7% | 8% | 8% |
| Patriot National (PN) |
Workers' comp insurance services |
$116 | -18% | -4% | -4% |
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IPO market snapshot
The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, gained 7.7% in 2014 and is up 6.1% in the past 90 days. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and its top holdings include Zoetis (ZTS), Alibaba (BABA), Twitter (TWTR), Hilton (HLT) and Ally Financial (ALLY).
