After a July 4th pause in the IPO market, eight companies could go public this week and raise $675 million.
None of the scheduled deals expect to raise over $125 million in proceeds, and only two have proposed market caps over $500 million. This week's offerings include three biotechs, two consumer IPOs, one high-growth tech deal, a consumer-focused telecom provider and a Chinese financial firm.
Returns have fallen significantly in the past two weeks: 2015 IPOs now average a 12% gain from the offer price, down from +20% three weeks ago. The average return after the first day is -3%, making returns particularly difficult for individual IPO investors. Last week, the VIX volatility index approached 20 for the first time since January, which could dampen issuance if it continues.
The magnificent Rapid7: Cybersecurity protection through detection
Backed by TCV and Bain Ventures, Rapid7 (RPD) is the week's rapid-growth IPO; the cybersecurity software provider increased sales by 40% to $24 million in the first quarter. Its sector is white-hot as new details emerge over the largest cyberattack on a US agency. Last year's cybersecurity IPO CyberArk (CYBR) has outperformed every other tech deal in 2014 and 2015. However, Rapid7 has booked huge losses even compared to security software peers, which have also achieved a greater scale. Regardless, this network vulnerability company is positioned to attract investor attention.
Ollie's offers "good stuff cheap" but is the retailer a bargain buy?
Ollie's Bargain Outlet Holdings (OLLI) is set to be the week's largest company and offering as the IPO seeks to raise $125 million at a market cap of nearly $850 million and enterprise value of $1.1 billion. Bought by CCMP Capital in 2012, Ollie's operates 187 stores in the Eastern US and plans to expand into the Southeast. The extreme discount retailer has achieved relatively strong comp growth and cash-on-cash returns, but has also taken on debt to pay insiders over $150 million since 2013.
Call me maybe: Ooma to raise $85 million
Backed by Worldview Technology Partners, Ooma (OOMA) provides low-cost internet-based phone service to residential and business customers who purchase its proprietary router. The telecom provider grew revenue by over 20% in the most recent quarter as its gross margin improved 300 bps to 50%. However, the cost of acquiring new customers has also risen while user growth slowed.
On a boat: Ship comes in for MasterCraft as it floats shares on the NASDAQ
Power boat maker MasterCraft (MCFT; on file as MCBC Holdings) will attempt to raise $85 million this week at a market cap of about $265 million. Restructured by Wayzata Partners in 2009 as it neared bankruptcy, the company brought in a new and experienced management team in 2012, with a strategy focused on improving operational efficiency and promoting its first-ever entry-level boat ($50,000-$75,000). Margins have improved and boat sales have risen since the recession. MasterCraft competes with market leader Malibu Boats (MBUU), which went public in January 2014 and recently hit MasterCraft with a patent infringement lawsuit. The last "back-from-bankruptcy" IPO offered by Wayzata Partners, Neff (NEFF), is down 30% from its November 2014 IPO. However, MasterCraft will have less than $10 million in debt after the IPO.
Juapi: Investing in a Chinese investments firm
Jupai (JP) may go public in the US as parent company E-House (China) Holdings (NYSE: EJ) considers going private. Jupai connects its network of high net worth individuals with a variety of fixed income, private equity and venture capital financial products, collecting a commission on each client investment. It also plans to bolster its recurring revenue by direct asset management. Most of its financial products are from Chinese firms, and the country's equity markets have been experiencing extreme volatility. Close public peer Noah Holdings (NYSE: NOAH) has fallen about 30% in the past month, but is still up 20% year-to-date.
Three biotechs: Cancer interference, pituitary therapy, cardiovascular cure
ProNAi (DNAI) is set to raise $101 million as the week's second-largest IPO. With venture backing from Vivo Capital, OrbiMed and RA Capital, ProNAi has shown promising results so far in clinical trials and could be applied to a wide range of cancers. The last DNA-interference biotech, Dicerna Pharmaceuticals (DRNA), had the single best first-day pop for an IPO in 9 years (+207%) when it went public in January 2014, but now trades 15% below its offer price. Chiasma (CHMA) claims that its proprietary technology can be used to develop oral therapies for treatments that are currently only available through painful injections. Backed by MPM Capital, Fidelity and Abingworth, it is initially targeting a growth disorder caused by an overactive pituitary gland. ProNAi and Chiasma both have proposed market caps above $350 million, which would put them at the top 25% of the last 100 biotechs by size. This larger biotech subset has averaged +80% from the offer price, compared to about +40% for the bottom three-fourths. BioCardia(BCDA), the week's smallest IPO, is developing a regenerative medicine for heart failure based on a patient's own bone marrow cells.
| Renaissance Capital's IPO Calendar - Week of July 13, 2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 bookrunners |
| Ollie's Bargain Outlet Holdings Harrisburg, PA |
OLLI NASDAQ |
$125 | $13 - $15 8,925,000 |
J.P. Morgan Jefferies |
| Closeout retailer with 187 warehouse style stores in the Eastern US. | ||||
| ProNAi Therapeutics Vancouver, Canada |
DNAI NASDAQ |
$101 | $14 - $16 6,700,000 |
Jefferies BofA Merrill Lynch |
| Developing cancer therapies based on DNA interference. | ||||
| Rapid7 Boston, MA |
RPD NASDAQ |
$90 | $13 - $15 6,450,000 |
Morgan Stanley Barclays |
| Provides analytics-based vulnerability management software to enterprises. | ||||
| MasterCraft Vonore, TN |
MCFT NASDAQ |
$85 | $13 - $15 6,071,429 |
Baird Raymond James |
| Sport boat manufacturer restructured by Wayzata Partners. | ||||
| Ooma Palo Alto, CA |
OOMA NYSE |
$85 | $16 - $18 5,000,000 |
Credit Suisse BofA Merrill Lynch |
| Provides internet-based phone service to homes and small businesses. | ||||
| Chiasma Newton, MA |
CHMA NASDAQ |
$75 | $13 - $15 5,360,000 |
Barclays Cowen & Company |
| Late-stage biotech developing an oral drug candidate for acromegaly. | ||||
| Jupai Holdings Shanghai, China |
JP NYSE |
$65 | $10 - $12.00 5,866,000 |
Credit Suisse China Renaissance |
| Chinese provider of wealth management services and products. | ||||
| BioCardia San Carlos, CA |
BCDA NASDAQ |
$50 | $12 - $14 3,846,154 |
Cantor Fitzgerald Roth Capital |
| Developing regenerative medicine for heart failure based a patient's own bone marrow. |
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IPO pipeline update: Albertsons/Safeway and Univision file for potential $1 billion IPOs
11 companies have submitted initial filings in the past two weeks. Albertsons Companies (ABS.RC), the PE-backed owner of Safeway and other grocery stores, filed for an IPO that could raise over $1 billion. The company has system-wide sales of $57 billion, about double the annual sales of the combined total of every 2015 IPO so far. Spanish language network Univision (UVN) could also be a billion-dollar deal. Five of the eleven new filers were biotechs, three of which (GBT, GNST, AIMT) have proposed deal sizes of $100 million or more.
IPO market snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has traded up 5% year-to-date, compared to 1% 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 4% year-to-date, compared to 3% for the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Altice and Deutsche Annington. Like most major indices, the IPO indices have declined in the past month due uncertainty in the Eurozone and China. To find out if this is the best ETF for you, visit our IPO Investing page.
