Five IPOs are set to raise nearly $1 billion in the week ahead.
With just seven technology IPOs to date, this could be the first time in 2015 that two tech companies go public in the same week. None of the five IPOs are health care (the sector saw some resistance last week), four have annual sales over $100 million and three claim to have a leading share of their market.
11 companies submitted initial filings last week, 7 of which were health care, setting the stage for what could be an active summer in the IPO market. Expect fewer launches during the week ahead due to Memorial Day.
Is Black Knight a cut above?
Black Knight Financial Services (BKFS) is the leading provider of automated solutions for mortgage servicing and originations. Spun out of Fidelity National Finance (NYSE: FNF), Black Knight's platform is used by the top 25 US mortgage servicers and 23 of the 25 largest US mortgage originators. The company's dominant market position only encourages more customers to use its platform to mitigate mortgage risk. Strong EBITDA margins (40%+) and minimum contract requirements provide a large and stable cash flow as it pays down $1.8 billion in post-IPO debt.
Canada's Shopify and China's Baozun bring e-commerce to the IPO market
Shopify (SHOP) is this week's high-growth IPO. Backed by Bessemer, First Mark and Insight Venture Partners, the company has more than doubled revenue in each of the last 2 years, and sales rose 109% in the 1Q15. The SaaS provider targets 10 million small and medium businesses trying to manage online stores. Like April IPO Etsy (ETSY), Shopify's revenue has recently exploded thanks to the introduction of its (lower-margin) payment processing service, but the industry is highly competitive and customers generally only commit to month-by-month subscriptions.
Baozun (BZUN) is the leading provider of brand e-commerce solutions in China with a 20% market share. Backed by Alibaba (BABA), Goldman Sachs and others, it operates in the $4 billion outsourced Chinese e-commerce solutions industry, which is expected to grow at about a 55% CAGR through 2017. It has attracted blue-chip customers like Nike and Microsoft while rapidly growing transaction volumes on its platform. However, investors should be conscious of Baozun's relatively high customer concentration current lack of positive free cash flow.
Hospitals pressing your buttons? Press Ganey for complaints
Press Ganey (PGND) operates in the nearly-$4 billion market for improving patient satisfaction at health care organizations. LBO'd by Vestar Capital Partners in 2008 for a reported $675 million, the company benefits from incentives under the Affordable Care Act that drive health care to become more consumer-focused. Press Ganey has established itself as the market leader in surveying patients, but also pitches its ability to leverage patient data into an analytics platform that recommends hospital best practices. Revenue grew 15% in the 1Q15 and its adjusted EBITDA margin improved slightly to 37%, with post-IPO debt dropping to 2.3x LTM adj. EBITDA.
Doctors and dividends: newly-formed health care REIT
Community Healthcare Trust (CHCT) is a newly-formed REIT targeting an initial portfolio of 35 health care-focused properties, including non-urban clinics and surgery centers. Aside from its relatively high initial yield of 7.5%, investors may be betting that CEO Timothy Wallace will leverage his public company experience as former co-founder and EVP of Healthcare Realty Trust (NYSE: HR).
| Renaissance Capital's IPO Calendar - Week of 5/18/2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Lead Managers |
| Black Knight Financial Services Jacksonville, FL |
BKFS NYSE |
$400 | $22 - $25 17,000,000 |
J.P. Morgan BofA Merrill Lynch |
| Fidelity National Financial's mortgage data and origination services platform. | ||||
| Press Ganey Holdings Wakefield, MA |
PGND NYSE |
$205 | $22 - $24 8,900,000 |
Barclays Goldman Sachs |
| Provides patient satisfaction survey and advisory services to healthcare providers. | ||||
| Baozun Shanghai, China |
BZUN NASDAQ |
$143 | $12 - $14 11,000,000 |
Morgan Stanley Credit Suisse |
| Provides brands with e-commerce and logistics services in China. | ||||
| Community Healthcare Trust Franklin, TN |
CHCT NYSE |
$125 | $19 - $21 6,250,000 |
Sandler O'Neill Evercore Partners |
| Newly-formed REIT focused on acquiring non-urban healthcare properties. | ||||
| Shopify Ottawa, Canada |
SHOP NYSE |
$100 | $12 - $14 7,700,000 |
Morgan Stanley Credit Suisse |
| Provides a cloud-based platform for small businesses to create online stores. | ||||
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IPO pipeline update: Filings pick up, primarily health care
11 companies submitted initial filings last week, the largest number in months. These included seven in the health care sector, two REITs, one tech filer and one energy. Several recent filers (CYNA, BITI, AXON) are focused on CNS disorders, a space that has seen M&A activity such as Teva's $3.5 billion acquisition of 2014 IPO Auspex Pharmaceuticals (ASPX) and Acorda Therapeutics' $525 million acquisition of proposed IPO Civitas Therapeutics (CVTS). The most notable filings include high-growth e-commerce solutions company Mindbody (MB) and high-growth device maker Glaukos (GKOS). Landmark Apartment Trust (LAT) was the week's largest filer, looking to raise $375 million.
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.
