Six companies went public in the past week, raising $1.4 billion. Half traded up 10% or more, and half had negative or no return.
For the second week in a row, the general partner of a midstream natural gas pipelines MLP priced an upsized IPO above its range to become the year's largest company to go public by market cap. We also saw the year's largest biotech IPO by proceeds and market cap. 63 IPOs have raised $11 billion year-to-date, compared to the 109 IPOs that had raised $21 billion by this point last year.
The S&P 500 reached an all-time high this week while the VIX volatility index remains comfortably below 15, signaling an open window for IPOs. However, the divergent returns of the two yield IPOs and various biotechs suggests that IPO investors remain discerning. The number of initial filings shot up to 11 this week - the highest in months - including 7 early-stage health care companies. Five companies, none of which are biotechs, are on the IPO calendar for next week.
Howdy partner: EQT GP up 20%
EQT GP Holdings LP (EQGP) surpassed last week's Tallgrass Energy GP (TEGP) to become the largest newly-public company of 2015 with a market cap of $7.2 billion. EQT GP's underlying pipeline MLP, EQT Midstream (EQM), trades at nearly four times its June 2012 IPO price. While investors generally remain cautious about the energy sector, IPOs like EQT GP and Tallgrass GP show that companies with well known backers, the stability of long-term contracts and a track record for growing distributions can outperform. EQT GP's low float of 8.6% of total diluted shares may also have boosted demand.
Fortress cracks: Air, land and sea IPO now yields nearly 8%
Fortress Transportation and Infrastructure Investors LLC (FTAI) had been on file for over one year but the LLC priced its IPO below the range and fell 3%. Formed by PE firm Fortress Investment Group (NYSE: FIG), the company owns a portfolio of marine, air and land transportation and infrastructure assets with relatively low leverage. Its stock now yields almost 8%, but investors may have been wary of commodities exposure and the execution risk associated with some of its newer assets.
Roll up Fenix rises up (13%) out of the ashes
Fenix Parts (FENX) priced 20% below its midpoint, which was enough to make IPO investors bid the stock up 13% by Friday. Much larger peer LKQ (NASDAQ: LKQ, $8.5 billion market cap) offers investors a proven model of the recycled auto parts business. The most recent roll-up IPOs have been disappointing, and include April 2015 REIT National Storage (NSA; +2%) and November 2014 software provider Upland (UPLD; -38%).
Its survival of the fittest biotechs with Galapagos
Galapagos (GLPG) raised $275 million, beating last year's Juno Therapeutics (JUNO) as the largest initial US offering of a biotech in at least 15 years. It went public with a market cap of $1.7 billion, the largest for a biotech this year. Though its stock had been publicly traded in Europe, Galapagos' shares gained 20% after they began trading on the NASDAQ. The biotech boasts a large pipeline of drug candidates backing from both Johnson & Johnson (NYSE: JNJ) and AbbVie (NYSE: ABBV).
Buy a brand new Jaguar - dog diarrhea biotech leaves pipeline at last
Jaguar Animal Health (JAGX) came back this week at a 25% lower valuation than it proposed in November 2014. Founded in 2013 but nearly 25 years in the making, the company broke issue on its first day but ended the week up $0.01 from the offer price.
Sowing the (genetically modified) seeds of a public company. Cropportunity awaits?
Arcadia Biosciences (RKDA) priced 43% below its midpoint and fell 9%. The company has assembled a sizable portfolio of genetic crop productivity traits, and even modest incremental crop yields in wheat or soybeans could be a huge boon. However, competition in the area is intense, and commercialization could remain years out.
3 delayed biotechs officially postpone - topical Botox, weight loss pill and gene therapy
Three biotechs had been attempting to price for two weeks but officially postponed this week. These include weight loss pill maker Gelesis (GLSS), gene therapy biotech MultiVir (MVIR) and topical botulinum toxin maker Anterios (ANTE).
16 of the 28 companies that have postponed or withdrawn IPOs this year due to market conditions, or 57%, are health care focused. The health care sector also makes up 48% of all IPOs to date.
| IPO pricings (week of May 11, 2015) | |||||
| Company (Ticker) | Business | Deal size ($mm) | IPO price vs. midpoint | 1st-day pop | Return at 5/15 |
| EQT GP Holdings LP (EQGP) | GP of EQT Midstream LP |
$621 | 20% | 22% | 20% |
| Galapagos (GLPG) |
Biotech: inflammatory disease | $275 | 0% | 20% | 19% |
| Fenix Parts (FENX) | Auto parts recyclers | $96 | -20% | 6% | 13% |
| Jaguar Animal Health (JAGX) | Biotech: Pet diarrhea | $20 | -13% | -3% | 0% |
| Fortress Tran. and Infra. LLC (FTAI) | Aviation, marine and air assets | $340 | -15% | -3% | -3% |
| Arcadia Bioscience (RKDA) | Genetic seed traits | $66 | -43% | -9% | -9% |
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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 8% year-to-date, compared to 3% for the S&P 500. 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 Voya Financial (VOYA). To find out if this is the best ETF for you, visit our IPO investing page.
