As many as seven IPOs could price this week, and four have a proposed market cap over $1 billion. So far, only eight companies that large have gone public this year, or 22% of all deals.
The 3 largest - Party City, Etsy and Virtu - are based in New York.
Wall Street loves an excuse to party
Party City's (PRTY) return to the public market should give PE owner Thomas H. Lee Partners something to celebrate. LBO'd in 2012 at a $2.7 billion valuation, the vertically integrated party supplies retailer is now being pitched at a $3.8 billion enterprise value. Party City's $2.3 billion in LTM sales is higher than any IPO in 2015, and its strong free cash flow provides a road toward paying down debt (5.3x LTM EBITDA), which was compounded in 2013 by a $340 million dividend. Close peer Michaels (MIK) has gained 60% from its June 2014 IPO.
Etsy's handcrafted $250 million IPO
Etsy (ETSY) is set to be the first online marketplace to go public since Alibaba (BABA) and the largest New York tech IPO in over 15 years. Revenue rose 56% in 2014 on the nearly $2 billion in goods sold on its website, giving Etsy three consecutive years with positive cash flow. However, investors may wonder at the sustainability of the B corp's organic growth, given its surge in marketing costs. Etsy's most valuable asset - its community - must also believe that selling shares doesn't mean the company is selling out.
Market maker Virtu makes public market debut
Like Party City, Virtu Financial (VIRT) has been on file for over a year. The high frequency trading firm provides liquidity on 225 exchanges in 34 countries, capturing small bid/ask spreads on over 5 million transactions per day. It has achieved impressive cash flow, and 70% to 100% of net income will be distributed to shareholders. Uncertainty over regulation, competition and market volumes raise concerns, but as of now, Virtu has demonstrated a strong track record turning pennies into millions.
Four biotechs led by billion-dollar cancer immunotherapy company Aduro
Aduro Biotech (ADRO) is set to be the year's second biotech offering with a $1 billion valuation, after Cellectis (CLLS). Aduro's immunotherapies for pancreatic cancer are less costly than others, and its Phase 2a trial was so successful it was stopped early and given breakthrough therapy designation. Its post-IPO cash of over $400 million and large collaborations with Janssen (Johnson & Johnson) and Novartis suggest it won't need additional financing any time soon. Shares will be scarce; if insiders purchase 57% of the offering, its float at the midpoint would be just 3% of the total market cap.
KemPharm (KMPH) has the potential to market the first abuse-deterrent version of Vicodin that immediately relieves pain. The company's management previously helped develop blockbuster drug Vyvanse. 2014 biotech IPO and peer Egalet (EGLT) is up 100% year-to-date, nearly back up to its offer price. Cidara Therapeutics (CDTX), which is backed by 5AM Ventures, Fidelity and InterWest Partners, is developing novel therapies for fungal infections. Last year's antifungal biotech SCYNEXIS (SCYX) trades 9% below its offer price.
"Best efforts" biotech Xbiotech (XBIT) recently launched two Phase 3 trials for an antibody therapy aimed at treating colorectal cancer. Its proposed $603 million market cap is larger than 92% of 2014 biotechs. The company is led by the founder of MannKind's predecessors and backed by the co-founder of Tiger Management. Recent antibody biotech IPOs Alder Biopharmaceuticals (ALDR; +179%) and Xencor (XNCR;+ 187%) have outperformed.
| Renaissance Capital's IPO Calendar - Week of 4/13/2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 Bookrunners |
| Party City Holdco Elmsford, NY |
PRTY NYSE |
$350 | $15 - $17 21,875,000 |
Goldman Sachs BofA Merrill Lynch |
| Vertically-integrated party supply retailer with 900 stores in the US and Canada. | ||||
| Virtu Financial New York , NY |
VIRT NASDAQ |
$298 | $17 - $19 16,532,272 |
Goldman Sachs J.P. Morgan |
| High-frequency electronic trading firm and market maker. | ||||
| Etsy Brooklyn, NY |
ETSY NASDAQ |
$250 | $14 - $16 16,666,666 |
Goldman Sachs Morgan Stanley |
| Operates an online marketplace for handmade and vintage goods. | ||||
| Xbiotech Austin, TX |
XBIT NASDAQ |
$76 | $18 - $20 4,000,000 |
WR Hambrecht |
| Developing antibodies for colorectal cancer and various other conditions. | ||||
| Aduro Biotech Berkeley, CA |
ADRO NASDAQ |
$75 | $14 - $16 5,000,000 |
BofA Merrill Lynch Leerink Partners |
| Developing two immunotherapy platforms for pancreatic and other cancers. | ||||
| Cidara Therapeutics San Diego, CA |
CDTX NASDAQ |
$60 | $14 - $16 4,000,000 |
Jefferies Leerink Partners |
| Developing novel therapies for fungal infections. | ||||
| KemPharm Coralville, IA |
KMPH NASDAQ |
$52 | $12 - $14 4,000,000 |
Cowen & Company RBC Capital Markets |
| Developing abuse-deterrent versions of widely-prescribed pain medications. | ||||
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IPO pipeline update
The IPO pipeline contains 128 names looking to raise a combined $23 billion. Bojangles' (BOJA) became the second recent consumer IPO filer (after DTEA), and prospects look good if investors are as hungry for its Southeast chicken and biscuits as they were for Shake Shack's (SHAK; +137%) burgers. Health care continues to dominate new filings, with aTyr Pharma (LIFE) and Adaptimmune Therapeutics (ADAP) leading the notable new filings.
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, has traded up over 9% year-to-date, compared to 2% for the S&P 500. This suggests that the IPO market remains open to new issuance heading into the 2Q 2015. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (TWTR), Alibaba (BABA), Hilton (HLT), Voya Financial (VOYA) and Ally Financial (ALLY). To find out if this is the best ETF for you, visit our IPO investing page.
