Eight IPOs raised $2.3 billion this past week. High-growth consumer deals Fitbit and Fogo de Chão came out on top.
This week featured a diverse set technology, consumer, energy, health care and industrial IPOs, none of which priced below the proposed midpoint. The largest first-day pops and drops tend to come from smaller companies, but Fitbit ($5 billion market cap at IPO) gained 48% on its debut, while MINDBODY and Celyad (both over $500 million market cap) crashed by more than 15%.
86 companies have gone public in the US this year, down 36% from this time last year but now outpacing 2013 by 8%. The average return for 2015 IPOs remains near +20%. With that backdrop, as many as 19 more are on the calendar to price this month, which could make it the busiest June for the IPO market since 1999.
A perfect FIT: Fitbit finishes Friday up 63%
Fitbit (FIT) priced 33% above its midpoint - by far the year's highest pricing premium for an IPO of its size - and the stock ran up 63% by Friday. Raising $732 million, it was the year's fourth largest IPO by proceeds and the second largest by valuation. It was originally pitched at a $3.7 billion diluted market cap, went public at $5 billion, then finished the week at $8.2 billion - close to the size of GoPro (GPRO; June 2014 IPO). The consumer tech company offers a familiar brand, profitability and explosive growth. IPO investors appeared unfazed by the potential of Apple Watch to steal share in the huge and fast-growing wearables market.
Never mind MINDBODY: Wellness software stretches limits with broken IPO
MINDBODY (MB) priced at its $14 midpoint and appeared ready to work out alright when it opened for trading above $16. Then investors started to sweat. The stock tumbled to a first-day loss of 17%, the worst first-day drop for a technology IPO since Upland Software (UPLD) last November. That puts MINDBODY's first day return in the bottom 3% of all IPOs led by Morgan Stanley in the past 5 years. Its market of yoga studios, salons and spas is massive, but the business management software provider is highly unprofitable and must continue to spend heavily on marketing. And MINDBODY could be a downward facing dog; since 2013, all nine of the tech IPOs that have initially fallen over 10% have continued to slide after the first day (most recently MaxPoint, MXPT, in March). However, its stock had partially recovered by Monday. Needless to say, MINDBODY's disappointing debut is not encouraging for the three tech IPOs on the calendar for next week.
Fogo de Chão: Good chow from the latest sizzling restaurant IPO
Fogo de Chão (FOGO) priced $3 above the original midpoint and gained 29% on its debut. Well done for the upscale Brazilian steakhouse, though not at all rare for a restaurant IPO: the year's three others (WING, BOJA, SHAK) average 68% on their first day. While a full service chain like Fogo won't grow sales like its fast casual forerunners, the restaurant offers IPO investors a new concept with a tableside service model that provides attractive labor costs. The only other restaurant IPO in the pipeline, steakhouse chain J. Alexander's (JAXH), has gotten cold with its most recent filing over 200 days old.
Investors have positive reaction to chemicals distributor Univar
Univar (UNVR) raised $770 million in the year's third largest IPO. Its deal size was 83% larger than originally proposed after it priced at the high end while CVC Capital added 15 million shares (43% of the total). It also raised as much as $500 million from Temasek in a private placement. Univar generates more revenue than any other 2015 IPO with $10 billion in LTM sales. Despite its high leverage and exposure to oil and gas prices, Univar likely gained interest as the #2 global player in the more than $200 billion chemicals distribution market. LBO'd in 2007, its PE backers appear to have priced it well: by Friday, its valuation multiple approached that of top competitor Brenntag.
8point3: Solar MLP has cloudy start
8point3 Energy Partners LP (CAFD) priced at the high end of the range but finished Friday down 2%. Over the past five years, only about 5% of IPOs that priced above the midpoint immediately break issue. Formed by SunPower (NASDAQ: SPWR) and First Solar (NASDAQ: FSLR), the joint venture primarily sells its solar power electricity to California utility companies. 8point3 offers an annual dividend of $0.83, meaning its more than 4% yield is above peers NextEra Energy, NRG Yield and TerraForm Power (TERP), the last of which completed a secondary offering on Thursday.
Three biotechs: Parkinson's, cardiovascular disease, cystic fibrosis
None of this week's three biotech IPOs traded up more than 10%. Two were listed abroad and the other priced at its midpoint. Cynapsus Therapeutics (CYNA), listed in Canada but up 9% in the US, recently began Phase 3 trials for an easy-to-use formulation of an approved Parkinson's disease therapy. Backed by Deerfield and Wellington, Nivalis Therapeutics (NVLS) is developing an add-on therapy for Vertex Pharmaceutical's soon-to-be-approved treatment for cystic fibrosis. Celyad (CYAD), a gene therapy biotech that was already listed in Europe, raised $100 million in a US IPO but dropped 20% on its first day of trading - the year's second worst first-day return. Formerly known as Cardio3 BioSciences, it recently shifted its focus from cardiovascular diseases to cancer from CAR T-Cell therapies.
Three long-delayed microcaps delayed longer
Three companies with market caps below $100 million had planned to list their shares on major US exchanges this week, but are now scheduled for next week. These include Chinese brick maker Yulong Eco-Materials (YECO), acquisition-focused Principal Solar (PSWW) and lactose intolerance biotech Ritter Pharmaceuticals (RTTR).
| 8 IPOs during the week of June 15, 2015 | |||||
| Company (Ticker) | Business | Deal size ($mm) | IPO price vs. midpoint | 1st-day pop | Return at 6/19 |
| Fitbit (FIT) | Wearable health trackers | $732 | 33% | 48% | 63% |
| Fogo de Chão (FOGO) |
Brazilian steakhouse | $88 | 18% | 29% | 29% |
| Univar (UNVR) | LBO'd chemicals distributor | $770 | 5% | 15% | 24% |
| Cynapsus Therapeutics (CYNA) |
Biotech: Easy-to-use Parkinson's drug |
$63 | 0% | 5% | 9% |
| Nivalis Therapeutics (NVLS) |
Biotech: Cystic fibrosis | $77 | 0% | 7% | 5% |
| 8point3 Energy Partners LP (CAFD) |
Solar power MLP | $420 | 5% | -2% | -2% |
| MINDBODY (MB) | Software for wellness SMBs | $100 | 0% | -17% | -17% |
| Celyad (CYAD) | Biotech: gene therapy for cardio/cancer | $100 | 0% | -20% | -20% |
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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 2% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Hilton Worldwide (HLT) and Twitter (TWTR). The Renaissance International IPO Index has traded up 9% year-to-date, compared to 6% 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.
