Etsy exploded 88% out of the gate, giving it the best first-day return for a tech IPO in over a year. Cancer immunotherapy biotech Aduro Biotech flew up 147%, the year's third IPO to more than double on day one.
This past week was the second largest of 2015 by proceeds raised as four companies went public at billion-dollar valuations, up from a week with two in January. 43 IPOs have raised a combined $6.8 billion in 2015, a far cry from the 91 IPOs that raised $18.4 billion by this point last year. However, the year-to-date average IPO return climbed up to 22%, its highest point so far.
Etsy (ETSY) finished Thursday up 88%, the highest first-day for a technology IPO since Castlight Health (CSLT) in March 2014. Like Shake Shack, this New York-based company obtained a valuation far above its closest peers, likely benefiting from strong brand recognition and a cult following. Its stock pulled back on Friday, closing with a 72% gain - still enough to satisfy the retail investors who were offered shares.
Aduro Biotech (ADRO) is the latest biotech IPO to gain over 100% on the first day of trading, which is particularly rare for a company so large. Aduro is the first health care company with a market cap over $1 billion to double on the first day in over ten years. It checks off all the boxes for a hot biotech IPO: immunotherapy, cancer indication, impressive backers (Johnson & Johnson, Novartis) and sizable cash reserves.
Virtu Financial (VIRT) gained 19% by week-end, overcoming concerns over regulation. The high frequency trading firm and market maker has made millions on the small bid/ask spreads of millions of securities, and plans to distribute that cash to stockholders in a dividend equal to over 70% of its net income.
Party City (PRTY) is the second LBO to go public in 2015 after GoDaddy (GDDY). Like GoDaddy, Party City's first-day gain (+22%) was better than that of any LBO in 2014. Bought by Thomas H. Lee Partners in 2012, the party supplies retailer has higher sales than any other 2015 IPO.
Xbiotech (XBIT) topped Party City and finished the week up 37%. Like Aduro, the company had been well-funded prior to the IPO and recently entered Phase 3 trials for its antibody therapy for colorectal cancer.
Note that the IPO was marketed on a "best efforts" basis and is therefore excluded from our IPO stats.
KemPharm (KMPH) was the week's only IPO to price below the range, and the biotech finished the week at its offer price. Its version of Vicodin/Norco is aimed at stopping the epidemic of opioid abuse, and the stock now trades at a market cap below close peer and 2014 IPO Egalet (EGLT), which is up 90% this year but still below its offer price.
Cidara Therapeutics (CDTX) was the week's only IPO to finish below its offer price. The anti-fungal biotech priced at the high end of the range and then finished its first day flat, calling to mind the initial pricing/performance of the last Jefferies-led biotech, Flex Pharma (FLKS), now up 25%.
| IPO pricings (week of April 13, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | 1st-day Pop | Return as of 4/17 |
| Aduro Biotech (ADRO) |
Biotech: Cancer immunotherapy |
$119 | 13% | 147% | 135% |
| Etsy (ETSY) | Online market for vintage goods | $267 | 7% | 88% | 72% |
| Xbiotech (XBIT) | Biotech: Cancer antibodies | $76 | 0% | 22% | 38% |
| Party City (PRTY) | Party supplies retailer | $372 | 6% | 22% | 27% |
| Virtu Financial (VIRT) | High frequency market maker | $314 | 6% | 17% | 19% |
| KemPharm (KMPH) | Biotech: Abuse-deterrent pain meds | $56 | -15% | 2% | 1% |
| Cidara Therapeutics (CDTX) | Biotech: Fungal infections | $77 | 7% | 0% | -5% |
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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, has traded up over 10% year-to-date, compared to 1% for the S&P 500. This suggests that the IPO market remains open to new issuance. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (TWTR), Alibaba (BABA), Hilton (HLT), Ally Financial (ALLY) and Voya Financial (VOYA). To find out if this is the best ETF for you, visit our IPO investing page.
