With just four IPOs this past month - all biotechs - the US IPO market had the slowest February since 2009. The prior two months also experienced 7-year lows. This past week had just one new offering.
In a dead-end market, look for a turnaround in the cul-de-SPAC
As we note in our SPAC blog post, blank check company Silver Run Acquisition (SRAQU) made headlines in the IPO market - partly because little else could - as it completed the year's largest "IPO" in an upsized $450 million offering. That's 13% more capital raised than the combined total from the four IPOs to date. Focused on oil and gas E&Ps at distressed prices, the "frack SPAC" is run by industry veteran Mark Papa, who led EOG Resources from its break with Enron in 1999 until 2013, establishing it as a titan in the industry. We note that as a SPAC, the offering does not count towards our IPO stats.
Volatility and returns finished February on a high note, but new filings are needed
Before the IPO window fully opens, volatility needs to decline while returns improve. The VIX Volatility Index has closed below 20 just four times this year, and three of them occurred in the past week. After a steep drop in the beginning of the year, the Renaissance IPO Index (IPOUSA) has risen 10% in the past two weeks. If these trends continue, IPO activity could pick up in March. However, only three companies have submitted new filings so far this month, meaning February is poised to be an 80-month low (since May 2009) for initial filings. The biotech sector drove January's 17 filings, but the sector's sell-off likely caused new submissions to dry up. However, early-stage gene-editing biotech Editas Medicine (EDIT; +72%) surged by about 50% this week, and the one scheduled for the week ahead - Syndax (SNDX) - is a biotech.
Pipeline update
Optical networking company Acacia Communications (ACIA) updated its financials results in the year's first IPO filing (amended or new) for a high-growth tech company, hinting that it could be the first tech IPO of the year. Profitable since 2014, it showed accelerating sales growth in the 4Q15. LBO'd clinic operator American Renal Associates (ARA) also updated its financials, and US Foods (USFD) reportedly selected banks for its IPO.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 14% year-to-date, compared to -5% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Synchrony Financial (SYF), Alibaba (BABA) and Citizens Financial Group (CFG). The Renaissance International IPO Index is down 12% year-to-date, compared to -8% for ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include NN Group and Recruit Holdings.
