Equity Selloff Hits Recent IPOs
Recent IPOs have not been exempt from the steep selloff in the major indices. As of midday Friday, the Renaissance IPO Index was down 5.6% for the week, underperforming the S&P 500's -4.3% return. One of the most prominent IPOs of recent memory, Twitter (TWTR), made headlines when it briefly traded below its November 2013 IPO price for the first time on Thursday. Another, Alibaba (BABA), is close to doing the same; it currently sits less than 2% above its September 2014 offer price.
More broadly, while the class of 2015 IPOs actually outperformed the S&P 500 this week, falling an average of only 2.8%, the IPO market is in danger of hitting an unwanted milestone. As of midday Friday, only 53% of 2015 IPOs were trading above their offer prices. A few more weak days in the market could bring this metric below 50%. Negative aftermarket trading has now wiped out more than half of IPO returns; the average IPO is up only 6.2% from its offer price, sharply below the average first-day close of 15.8%.
Benitec Biopharma (BNTC), the only IPO this week, fell 13.5% on its first day trading. The company raised $14 million by offering 1.5 million ADSs at $9.21 on Tuesday, a 23% discount to its last price on the Australian Stock Exchange. Benitec, which is developing a gene therapy platform based on DNA-directed RNA interference, originally filed terms on July 27 for a $65 million offering only to postpone its IPO ten days later. On August 10, the company revised its terms downward to $25 million, followed by another downward revision on August 13 to $15 million. In a week where the Nasdaq Biotechnology Index fell 4.5%, Benitec underperformed, trading 13% below its offer price as of midday Friday.
Out of ten IPOs so far in August, Benitec Biopharma is the sixth deal after Planet Fitness (PLNT), Amplify Snack Brands (BETR), Sunrun (RUN), Conifer Holdings (CNFR) and Intec Pharma (NTEC) to break its offer price on day one. While we believe there is a large backlog of companies still targeting an IPO by year-end, this poor performance, coupled with the broader selloff, may cause firms to be cautious when the IPO window reopens after Labor Day.
