As many as 11 companies could go public this week, including the year's largest IPO (Digicel) and the fastest-growing company (Pure Storage). Both have proposed market caps of more than $3.5 billion, while six others target valuations of $300 million or less.
Last week, there were also 11 IPOs set to price, but only 5 got through, and each came in significantly below the range. Of the 139 IPOs this year, 60% of now trade below the offer price. For the 11 deals on the IPO calendar this week, expect heavy pushback on valuations to continue, as others are unable to price at all.
Digicel: Looking to raise $1.8 billion in the year's largest IPO to date
As we noted in our 3Q 2015 IPO Market Review, the fourth quarter should see a number of large IPOs with massive debt. The first of these mega-deals, Caribbean wireless provider Digicel (DCEL), is set to raise $1.8 billion in the week ahead. That would make it the year's largest IPO so far by about +50%. The telecom has the dominant position in primary markets Haiti, Jamaica and Papua New Guinea, but must manage $5.3 billion in debt (4.5x LTM EBITDA), some of which was used to pay insiders over $1 billion in distributions during the prior two years.
The data storage all-star: Tech unicorn Pure Storage tests IPO market
Over 100 companies have achieved private market valuations of $1 billion or more, but these "unicorns" are a much rarer sight in the IPO market. Pure Storage (PSTG) is set to be the year's second high-profile unicorn to go public after Box's (BOX; -17%) January IPO. It is also the second tech IPO in the 2H15, following Rapid7's (RPD; +39%) offering in mid-July. Pure has grown faster than any one of its storage peers, as gross bookings nearly quadrupled to $231 million during its last fiscal year. With an accumulated deficit of $455 million, the company has also produced significant losses as it aggressively markets its all-flash enterprise storage solution against industry-leader EMC.
What's in your wallet? Likely a credit card made by CPI Card Group
CPI Card Group (PMTS) is the week's third-largest IPO, set to raise $300 million at a valuation of $867 million ($1.2 billion enterprise value). It has the largest market share in the US (35%) for plastic credit and debit cards, and sales grew 80% to $173 million in the 1H15 as US banks increasingly issue chip cards. However, growth will slow after that transition is complete, and mobile payments could eventually begin to replace credit cards. CPI is the week's only IPO to have insider selling - PE backer Tricor and CEO Steven Montross are floating about half of the deal.
Houston, we have a banking IPO
Based in Houston, Texas, Allegiance Bancshares (ABTX) will attempt to raise $60 million at a market cap of $291 million this week. The regional bank has $2 billion in assets and a ROE of about 7.5%. Of note, all six of the year's bank IPOs trade above their offer price, and average a gain of 15%. However, last year's Houston-based bank, Green Bancorp (GNBC), trades below its offer price, and is off 22% in the past three months.
Four biotech IPOs
Despite recent turmoil in biotech stocks, five are attempting to go public this week. Last week, Edge Therapeutics (EDGE) gained 59% by Friday suggesting the window for biotech IPOs is not closed. However, Mirna Therapeutics (MIRN) ended the week flat while NovoCure (NVCR) was down 17%.
Backed by Third Rock Ventures, Fidelity and Pfizer, CytomX Therapeutics (CTMX) is the week's largest biotech, looking to raise $100 million at a market cap of $585 million. With only preclinical data, it may also be in the earliest stage of development. Previous Third Rock biotech IPO Global Blood Therapeutics (GBT) popped 116% on its first day and has traded up from there. Biotechs without Phase 1 data are inherently a leap of faith, and while CytomX targets the white-hot area of tumor-activated cancer immunotherapies, investors may equate that with a higher chance of getting burned.
Backed by Vivo, Fidelity and Sofinnova, Aclaris Therapeutics (ACRS) is set to begin pivotal Phase 3 trials in the beginning of 2016 for its hydrogen peroxide-based treatment for extremely common skin lesions. Led by an experienced management team, the biotech targets a massive market for which there is no prescription treatment, but its therapy would likely not be reimbursed by payors, and most skin lesions go untreated. RA Capital-backed Strongbridge Biopharma (SBBP) had been on the calendar for last week, though IPO investors may have been skeptical at a valuation pitched 20% above its June 2015 valuation. The company has raised $70 million in private funding since last year as it develops and acquires a portfolio of therapies for rare endocrine disorders - a market opportunity of more than $1 billion. The smallest of the microcaps with a diluted valuation of $71 million, depression biotech Cerecor (CERCU) recently added dilutive warrants to the offering, making the biotech more attractive for IPO buyers, but its common stock more expensive in the aftermarket.
Three more delayed microcap IPOs are back
Two profitable Chinese manufacturers will again attempt to price IPOs this week. These include Sole Elite Group (SOLE), which makes athletic shoe soles, and Fuling Global (FORK), which produces disposable plastic cutlery for US fast food chains. SynCardia Systems (TAHT) is developing and commercializing the only total artificial heart available in the US, the EU and Canada.
| Renaissance Capital's IPO Calendar - Week of October 5, 2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 bookrunners |
| Digicel Group Hamilton, Bermuda |
DCEL NYSE |
$1,800 | $13 - $16 124,137,928 |
J.P. Morgan UBS IB |
| Leading provider of mobile services in the Caribbean with 14 million subscribers. | ||||
| Pure Storage Mountain View, CA |
PSTG NYSE |
$425 | $16 - $18 25,000,000 |
Morgan Stanley Goldman Sachs |
| Provides flash memory-based enterprise storage hardware. | ||||
| CPI Card Group Littleton, CO |
PMTS Nasdaq |
$300 | $16 - $18 17,647,060 |
BMO Capital Markets Goldman Sachs |
| Largest US provider of plastic credit and debit cards. | ||||
| CytomX Therapeutics South San Francisco, CA |
CTMX Nasdaq |
$100 | $14 - $16 6,666,667 |
BofA Merrill Lynch Jefferies |
| Preclinical biotech developing tumor-activated cancer immunotherapies. | ||||
| Strongbridge Biopharma Trevose, PA |
SBBP Nasdaq |
$76 | $17.93 4,250,000 |
BofA Merrill Lynch Stifel |
| Late-stage biotech developing therapies for rare endocrine disorders. | ||||
| Aclaris Therapeutics Malvern, PA |
ACRS Nasdaq |
$75 | $14 - $16 5,000,000 |
Jefferies Citi |
| Developing a proprietary hydrogen peroxide treatment for common skin lesions. | ||||
| Allegiance Bancshares Houston, TX |
ABTX Nasdaq |
$60 | $22 - $24 2,600,000 |
Baird Stephens |
| Commercial bank with 16 locations in Houston and $2 billion in assets. | ||||
| Sole Elite Group Jinjiang, China |
SOLE Nasdaq |
$33 | $10 - $12 3,000,000 |
Dawson James ViewTrade |
| Chinese athletic shoe sole manufacturer. | ||||
| SynCardia Systems Tucson, AZ |
TAHT Nasdaq |
$28 | $10 - $12 2,500,000 |
Roth Capital |
| Developer and manufacturer of temporary implantable artificial hearts. | ||||
| Cerecor Baltimore, MD |
CERCU Nasdaq |
$27 | $6 - $7 4,230,769 |
Maxim Group |
| Developing a novel adjunct therapy for major depressive disorder. | ||||
| Fuling Global Wenling, China |
FORK Nasdaq |
$25 | $5 5,000,000 |
Burnham Securities |
| Chinese producer of disposable plastic cutlery and other food service products. | ||||
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2 Mega LBOs set terms for IPOs next week
Including Digicel, three companies are already on the IPO calendar to raise more capital ($6.4 billion) than all 34 IPOs from the third quarter combined ($5.1 billion). Last week, large pre-crisis LBOs Albertsons/Safeway(ABS) and First Data (FDC) set terms to raise $1.6 billion and $3.0 billion, respectively, during the week of October 12. Last year's largest IPO, Alibaba (BABA; $22 billion deal size), went public as broader markets roared upward, but these three high-debt heavyweights are coming to market in a period of choppiness and "buyer power" in the IPO market. It could also be their last chance to go public before interest rates rise.
IPO pipeline update: Two biotechs and one more billion-dollar LBO file
Two biotechs submitted initial filings last week, including Third Rock Ventures-backed MyoKardia (MYOK), in Phase 1 trials for hypertrophic cardiomyopathy. Advanced Accelerator Applications (AAAP) refiled to raise $75 million after it withdrew an IPO in February. The third IPO filer, KKR-backed Laureate Education (LAUR), could raise an estimated $1 billion to pay down debt. Previously Sylvan Learning Systems, Laureate is the largest provider of for-profit higher education.
IPO Market Snapshot
The Renaissance IPO Index has traded down 10.2% year-to-date, compared to -5.2% 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 down 5.2% year-to-date, compared to -7.2% for the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Recruit Holdings and Cheil Industries. To find out if this is the best ETF for you, visit our IPO Investing page.
