It's a big week for big IPOs.
As many as 10 companies are on the IPO calendar to go public, including the year's largest and second-largest initial public offerings. Six are set to raise less than $50 million, mostly holdovers that had been unable to price in prior weeks.
Two large pre-crisis leveraged buyouts - payments processor First Data and grocery chain Albertsons - are scheduled to return to the public market this week and raise a combined $4.6 billion. Both companies hold massive amounts of debt, but are on course to begin generating over $1 billion in free cash flow over the next two years. As we noted in the weekly recap, nine of the past ten IPOs came public below their proposed range, a trend that should continue in the week ahead.
First Data: Largest IPO of 2015
First Data (FDC) is set to raise $3 billion in what will be the year's largest IPO, targeting a market cap of almost $18 billion ($36 billion enterprise value). In 2007, a KKR-led consortium bought the company for $29 billion in one of the largest-ever LBOs, but its debt nearly crippled the company until KKR (NYSE: KKR) doubled down in 2014 by leading a $3.5 billion recapitalization. First Data is the world's largest merchant acquirer, helping to process credit and debit card payments for over 6 million business locations across 118 countries. It boasts an experienced management team, including the former COO and CIO of JPMorgan Chase (NYSE: JPM), but will remain highly levered after the IPO with a debt level of 7x its LTM EBITDA.
Is Albertsons/Safeway a safe way to play the IPO market?
Albertsons Companies (ABS) is set to raise $1.6 billion at a market cap of $12 billion ($22 billion enterprise value). The company was formed by Cerberus Capital Management, which acquired Albertsons stores in 2006 and then doubled its size in January 2015 with the $8.5 billion acquisition of Safeway. It now hopes to leverage large cost-saving synergies as it uses its cash flow reduce its high leverage. As the the third-largest grocer in the US behind Walmart and Kroger, Albertsons Companies has the #1 or #2 market share in 68% of its MSAs, but an EBITDA margin below its closest peers.
Adesto: It's the IoT IPO
Adesto Technologies (IOTS) claims that its low-power flash memory chips are ideal for "Internet of Things" devices, an industry expected to grow from $0.7 billion to $1.7 billion by 2019. However, that market may be growing without it - sales and gross margin both fell in the 1H15.
American Farmland Company (AFCO) is set to raise $114 million at a valuation of $252 million. It is the first REIT to go public in five months. The company owns 18 farms primarily in California, Illinois and Florida, and has set an annual dividend of $0.25, a 2.6% annual yield at its $9.50 midpoint. Three of the year's six REITs trade above the offer price, and the group has an average return of 1%.
Another large SPAC
Entrepreneur Mark Ein plans to raise $350 million for his third blank check company, Capitol Acquisition III (CLACU), after merging Capitol II with Lindblad Expeditions (Nasdaq: LIND) in July. 2015 has seen more SPACs price than any year since 2007, including five that have raised $350 million or more, compared to just one during 2009-2014. We do not include SPACs in our IPO stats.
Six companies wait for their IPO window
Six companies that have delayed offerings, some for several weeks, will again seek to go public. The largest of these, RA Capital-backed endocrine biotech Strongbridge Biopharma (SBBP), originally set terms to raise $76 million at a market cap of $423 million. Two biotechs and a small medical products company, Cerecor (CERCU), Oasmia Pharmaceuticals (OASM) and SynCardia Systems (TAHT), are each looking to raise less than $30 million. Two profitable Chinese manufacturers, athletic shoe sole maker Sole Elite Group (SOLE) and plastic cutlery producer Fuling Global (FORK), could also price this week.
| Renaissance Capital's IPO Calendar - Week of 10/12/2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Lead Manager(s) |
| First Data New York, NY |
FDC NYSE |
$3,040 | $18.00 - $20.00 160,000,000 |
Citi Morgan Stanley |
| Provides payment processing to merchants and financial institutions. | ||||
| Albertsons Companies Boise, ID |
ABS NYSE |
$1,600 | $23.00 - $26.00 65,306,120 |
Goldman Sachs BofA Merrill Lynch |
| Third-largest US grocer operating under Albertsons, Safeway and other banners. | ||||
| Capitol Acquisition III Washington, DC |
CLACU Nasdaq |
$350 | $10.00 - $10.00 35,000,000 |
Citi Deutsche Bank |
| Blank check company formed and led by Mark Ein. | ||||
| American Farmland Company New York, NY |
AFCO NYSE |
$114 | $8.50 - $10.50 12,000,000 |
Deutsche Bank Citi |
| Internally managed REIT with farmland in California, Illinois and Florida. | ||||
| Strongbridge Biopharma Trevose, PA |
SBBP Nasdaq |
$76 | $17.93 - $17.93 4,250,000 |
BofA Merrill Lynch Stifel |
| Late-stage biotech developing therapies for rare endocrine disorders. | ||||
| Adesto Technologies Sunnyvale, CA |
IOTS Nasdaq |
$45 | $10.00 - $12.00 4,100,000 |
Needham Oppenheimer |
| Fabless provider of flash memory chips for Internet of Things devices. | ||||
| Sole Elite Group Jinjiang, China |
SOLE Nasdaq |
$33 | $10.00 - $12.00 3,000,000 |
Dawson James ViewTrade |
| Chinese athletic shoe sole manufacturer. | ||||
| SynCardia Systems Tucson, AZ |
TAHT Nasdaq |
$28 | $10.00 - $12.00 2,500,000 |
Roth Capital |
| Developer and manufacturer of temporary implantable artificial hearts. | ||||
| Cerecor Baltimore, MD |
CERCU Nasdaq |
$27 | $6.00 - $7.00 4,230,769 |
Maxim Group LLC |
| Developing a novel adjunct therapy for major depressive disorder. | ||||
| Fuling Global Wenling, China |
FORK Nasdaq |
$25 | $5.00 - $5.00 5,000,000 |
Burnham Securities |
| Chinese producer of disposable plastic cutlery and other food service products. | ||||
| Oasmia Pharmaceutical Uppsala, Sweden |
OASM Nasdaq |
$20 | $5.75 - $7.75 2,900,000 |
Ladenburg Thalmann |
| Developing formulations of widely-used cancer drugs for humans and dogs. | ||||
| IPO ETF manager Renaissance Capital | ||||
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Start your engines: Ferrari sets terms for $859 million IPO
Ferrari (RACE) set terms to raise $859 million in an IPO that would value the company at $9.4 billion, almost half of the market cap of parent Fiat Chrysler. Ferrari has been one of the most anticipated IPOs of the year. Another large offering, Multi Packaging Solutions International (MPSX), is on the calendar to raise $300 million. It was LBO'd by The Carlyle Group and Madison Dearborn. Both IPOs are scheduled for the week of October 19.
IPO pipeline update: Filing activity hits a 4-month high as 11 companies join pipeline
The IPO market is gearing up for an active fourth quarter, as 11 diverse companies submitted initial public filings in the past week - the most active week since June. The flurry of activity was supported by the VIX volatility index ending the week at about 17, its lowest level since the mid-August spike. While markets have stabilized, the fact that most IPOs still trade below the offer price will continue to weigh on investors' minds in determining valuations. Financial data provider IDC (IDC) joined the backlog of large LBOs in the pipeline, filing for an IPO that could raise $700 million. Other filings in the financial sector include online mortgage provider loanDepot (LDI), Nordic Realty Trust (NORT) and Missouri-based Equity Bancshares (EQBK). The tech sector saw Instructure (INST) and Xtera Communications (XCOM) submit filings. Well-funded biotechs Wave Life Sciences (WVE) and Voyager Therapeutics (VYGR) both filed for $80+ million IPOs.
IPO Market Snapshot
Strong IPO volume in the fourth quarter will in part hinge on improved returns for recent IPOs. The Renaissance IPO Index has traded down 6.9% year-to-date, compared to -2.1% 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 1% year-to-date, compared to -2.7% 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.
