Yield IPOs yielded disappointing returns while biotech performance was anemic.
13 companies were added to the IPO calendar - including 7 in the health care sector - making this an inopportune week for a drop in the NASDAQ Composite. 49 companies have gone public in 2015, and average year-to-date returns fell 600 bps this week to +14% at Friday's close, or +7% excluding Shake Shack (SHAK; +237%) and Spark Therapeutics (ONCE; +154%). Average aftermarket performance swung negative to -0.5% as recent high-flyers like Etsy (ETSY; +36%) and Aduro Biotech (ADRO) slid from their speculative first-day pops.
None of the IPO launches were technology companies, and none of the year's seven tech IPOs trade above their first day close, averaging +3% total return and a dismal -16% in the aftermarket.
Two MLPs: Viva Enviva, Black Stone goes red
Enviva Partners LP (EVA) is the world's largest wood pellets manufacturer with 15% of global capacity. Formed by Riverstone/Carlyle (NYSE: CG), the MLP is a play on renewable-ish energy, as the wood-based fuel can be used in converted coal plants. It offered an 8% yield at the midpoint.
Black Stone Minerals LP (BSM), one of the largest owners of oil and gas mineral interests in the US, fell 4% on its debut. Its broken IPO may reflect the fact that it is the first deal with direct exposure to energy prices in 9 months, despite its clean balance sheet, diverse portfolio and 5% annual yield (compared to Viper Energy's 4% (VNOM)). By market cap, Black Stone is the year's second largest company to go public; the largest is Inovalon (INOV), down 7%.
Two biotechs: Does Blueprint signal a closing window for biotech IPOs?
For biotech investors, Blueprint Medicines (BPMC) picked the wrong week to go public. The preclinical biotech priced above the range and quickly shot up 30%, but then petered out to a 5% first-day pop, and +3% by Friday. The hyperactive market for biotech IPOs has proved resilient over the past two years, but sustained losses could dry up the sector. Next week could see as many as seven biotech IPOs.
A new and smaller Viking Therapeutics (VKTX) was the week's top IPO, up 14% by Friday. Using molecules licensed from Ligand Pharmaceuticals (NASDAQ: LGND), the biotech previously targeted type 2 diabetes with a proposed $168 million market cap in September 2014; it came back this week with a drug candidate for hip repair after surgery and a $73 million market cap.
CoLucid Pharmaceuticals (CLCD) and OpGen (OPGN) had been scheduled to price, but the two health care companies are now set for the week of May 4.
| IPO pricings (week of April 27, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | 1st-day Pop | Return as of 5/1 |
| Viking Therapeutics (VKTX) |
Biotech: Hip fracture recovery |
$24 | -27% | 12% | 14% |
| Enviva Partners LP (EVA) | Yield: PE-backed wood pellet producer | $200 | 0% | 8% | 7% |
| Blueprint Medicines (BPMC) | Biotech: Preclinical kinase-based cancer therapies | $147 | 13% | 5% | 3% |
| Black Stone Minerals LP (BSM) | Yield: Oil and gas interests | $428 | -5% | -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, has traded up 6% year-to-date, compared to 2% for the S&P 500. The index had reached its highest point ever last Friday, but it fell due to Twitter's decline. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Twitter (TWTR), Hilton (HLT), Ally Financial (ALLY) and JD.com (JD). To find out if this is the best ETF for you, visit our IPO investing page.
