This past week saw four IPOs raise over $400 million, making it the year's busiest week by deal count. The first venture capital tech IPO, Acacia Communications, had the year's best first-day pop (+35%), while CD&R's landscaping LBO, SiteOne, had the year's second-best debut (+27%). We attribute their success to strong business fundamentals, demonstrating growth and profitability, pitched at a discount to peers.
Tech takes over: Acacia's 35% first-day pop is best of 2016
Acacia Communications (ACIA) priced at $23, the high end of the range, and popped 35% on Friday. The first venture-backed tech IPO of 2016 came to market well below its optical peers despite Acacia's much faster growth and superior margins. The company will have to maneuver past a recent trade restriction on its top customer, but thanks to an industry-wide data center upgrade, the demand for its high-speed optical networking products may be great enough for them to reach the end customers. While the year's other tech IPO, security services provider SecureWorks (SCWX; -11%), is dogged by unimpressive growth and margins, Acacia's success suggests that IPO investors are still interested in growth stocks - an encouraging sign for the high-growth tech names in the backlog.
IPO landscape welcomes private equity as SiteOne surges 34%
SiteOne Landscape Supply (SITE) priced at the $21 midpoint to raise $210 million (100% from insiders) and finished the week up 34%. Carved out of John Deere by CD&R, SiteOne offered investors a chance to own the only national distributor of professional landscape supplies; a business with solid 7% organic growth and strong cash flows at a reasonable discount to peers.
Keep on rolling: Zig-Zag maker Turning Point prices down and gains 9%
Turning Point Brands (TPB) raised $54 million by pricing its IPO at $10, a 29% discount to the midpoint (the year's largest for a non-biotech), and finished the week up 9%. Shareholders invested $34 million (63%), which TPB used to redeem PIK notes held by those shareholders. The US seller of Zig-Zag rolling papers priced at a reasonable discount, likely a result of its declining sales (-2% in 2015), heavy debt load and lack of a dividend.
Biotechs go one for three: Oncobiologics prices down and plummets 20%
Originally scheduled for the prior week, Oncobiologics (ONS) slashed its proposed price by 50% and sweetened the IPO with warrants in order to raise $35 million (57% bought by insiders) at a market cap of $152 million. Those warrants appear less sweet after its -20% drop on the first day, the worst debut for an IPO since August 2015. The micro-cap biotech hopes to compete with the likes of AbbVie, Amgen and Roche as it develops biosimilars to blockbuster drugs.
Fungal disease biotech Viamet Pharmaceuticals (VMET) postponed its $86 million IPO, despite insiders indicating on nearly half the deal. Micro-cap biotech Cancer Prevention Pharmaceuticals (CPP) has again pushed back its $25 million offering (20% insider); deal timing is now set as day-to-day.
| IPO Pricings: Week of May 9th, 2016 | ||||||
| Issuer Business |
Deal Size ($mm) |
Market Cap ($mm) |
Price vs. midpoint |
First day return |
Return at 5/13 |
|
| Acacia Communications (ACIA) |
$104 | $930 | +5% | +35% | +35% | |
| Provides low-power, high-speed interconnect modules for optical networks. |
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| SiteOne Landscape Supply (SITE) |
$210 | $863 | 0% | +27% | +34% | |
| National distributor of commercial and residential landscape supplies. |
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| Turning Point Brands (TPB) |
$54 | $187 | -29% | +1% | +9% | |
| Sells tobacco products in the US under the Zig-Zag and Stoker's brands. |
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| Oncobiologics (ONS) | $35 | $152 | -50% | -20% | -20% | |
| Developing biosimilars of blockbuster drugs Humira and Avastin. |
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Filings, launches and updates
Five companies joined the calendar this past week, including the second-largest US food distributor, US Foods (USFD), a 2007 LBO from CD&R and KKR that plans to raise $1 billion. There were two new initial filings: Apollo's life insurance and annuities provider Athene Holding (ATH), with an estimated $1 billion deal size; and China-based English learning platform China Online Education Group (aka 51Talk; COEG.RC), with a $100 million deal size. The week's most notable update from the IPO pipeline was Albertsons (ABS) disclosure of fiscal 2015 financials; the Cerberus-backed LBO postponed its $1.6 billion IPO back in October 2015, and could be gearing up for a second go.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 8.2% year-to-date, while the S&P 500 is up 0.1%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Synchrony Financial (SYF) and Citizens Financial Group (CFG). The Renaissance International IPO Index is down 3.9% year-to-date, compared to -1.3% for ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include NN Group and Aena S.A. To find out if this is the best ETF for you, visit our IPO Investing page.
