Five companies - no biotechs - went public in the past week and raised $1.0 billion. All five IPOs had positive returns and, even more rare, each one continued to trade up after the first day.
68 IPOs have raised $12 billion year-to-date, over 40% below 2014's level, but much closer to what we saw in '06, '07, '13 and the first half of '11 and '12. Assuming broader markets can weather the looming interest rate hike and remain stable, 2015 could still see over 200 companies go public.
There are no deals on the IPO calendar for next week due to Memorial Day. However, expect IPO activity to surge beginning on Tuesday: average returns from 2015 IPOs are near their highest, the VIX volatility index reached its lowest point this week and June was the second-most active month last year. After a slow first quarter for technology IPOs, the sector appears poised to pick up - we saw three new tech deals file in the past week (a new high for 2015) while three others updated filings.
Setting up SHOP
Shopify (SHOP) gratified both IPO investors and VC-backers Bessemer and FirstMark with a 67% gain by end-of-week. It priced its IPO at $17, or 31% above the midpoint - the third-highest this year behind Spark Therapeutics (ONCE; +194%) and Shake Shack (SHAK; +342%). Based in Canada, Shopify offers an online platform for small and medium-sized businesses to manage multiple sales channels including e-commerce. The high-growth (+109% in the 1Q15) tech company competes with Square, which could come later this year.
The Black Knight rises 16%
Black Knight Financial Services (BKFS), the week's largest IPO by proceeds and market cap, priced just above its midpoint and gained 16%. Spun out of Fidelity National Finance (NYSE: FNF), Black Knight is the most widely used platform for mortgage servicing and origination in the US.
Press Ganey gains 11%
Patient satisfaction survey provider Press Ganey satisfied investors with an 11% return after pricing at the high end of the range. LBO'd by Vestar Capital in 2012 for $675 million, the company went public at an enterprise value of nearly $1.6 billion. Though some doctors have railed against tying patient satisfaction to hospital income, Press Ganey's dominant market position and potentially high-margin analytics play may have convinced investors of the long-term viability of its role in the health care system.
Baozun was the week's only IPO to price below the range; the Chinese e-commerce outsourcer saw its valuation cut 23% but its stock rose 11% by Friday. While its top two customers represented over 50% of sales, Baozun has been a leader in the large and growing market of brand e-commerce in China.
Community Healthcare Trust (CHCT) is a newly-formed REIT targeting non-urban medical offices. The week's smallest company ($127 million market cap) was the year's sixth REIT, surpassing the five in all of 2014. CHCT was the only IPO to gain less than 10% this week as it finished slightly above its original midpoint, back to an expected yield of 7.5%. Led by the co-founder of Healthcare Realty Trust (NYSE:HR), the REIT's management will be paid entirely in stock.
Software company Code Rebel (CDRB) also priced its "best efforts" min/max IPO at $5, opened on Tuesday at $12, and finished the week at nearly $35 (a $450 million market cap), up about 600% on extremely low volume.
| IPO pricings (week of May 18, 2015) | |||||
| Company (Ticker) | Business | Deal size ($mm) | IPO price vs. midpoint | 1st-day pop | Return at 5/22 |
| Shopify (SHOP) | Software for online stores | $131 | 31% | 51% | 67% |
| Black Knight Financial Services (BKFS) |
Mortgage data platform | $441 | 4% | 11% | 16% |
| Baozun (BZUN) | Outsourced e-commerce in China | $110 | -23% | 4% | 11% |
| Press Ganey (PGND) | Patient surveys and data | $223 | 9% | 10% | 10% |
| Community Healthcare Trust (CHCT) | Healthcare property REIT | $119 | -5% | 4% | 6% |
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IPO market snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has traded up 9% 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) and Hilton Worldwide (HLT). The Renaissance International IPO Index has traded up 14% year-to-date, compared to 10% for the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Altice and Deutsche Annington. To find out if this is the best ETF for you, visit our IPO Investing page.
