The third quarter finished with the year's best first-day pop as Nutanix spiked 131% on Friday. September ended as the most active month of 2016 both in terms of IPO pricings (16) and initial filings (18). Nutanix's incredible first-day performance was a fitting end to a quarter marked by the return of tech IPOs and 41% average returns.
Nutanix pops 131%: Hyperconvergence is more than hype
Nutanix's (NTNX) long-awaited IPO did not disappoint. Originally pitched at $12 with a $2 billion market cap (near its last private round), it priced a larger share offering above the upwardly-revised range at $16 to raise $238 million - 42% more than originally planned - and finished the day at $37 ($6.5 billion diluted market cap). Initial trading may have benefited from a relatively low float-to-market cap. Nutanix is a leader in hyperconverged IT infrastructure, a multi-billion dollar opportunity, and boasts a bevy of blue chip customers. Despite heavy losses, investors were likely drawn to its hyper growth and positive operating cash flow. The warm reception given to Silicon Valley's largest tech IPO of 2016 should encourage more large and fast-growing tech companies to make the leap and list in New York.
| IPO Pricings Week of September 26th, 2016 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First-day return |
Return at 9/30 |
| Nutanix (NTNX) | $238 | $329 | 33% | +131% | +131% |
| Leading provider of hyperconverged IT infrastructure software and appliances. |
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| Tabula Rasa HealthCare (TRHC) | $52 | $213 | -14% | +24% | +19% |
| Provides e-prescription fulfillment and medication risk management services. |
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| Fulgent Genetics (FLGT) | $38 | $471 | -31% | +2% | +2% |
| Offers genetic testing for over 7,500 conditions. |
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| Medequities Realty Trust (MRT) | $239 | $367 | -8% | -3% | -2% |
| Recently-formed REIT focused on health care properties in Texas and California. |
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Three IPOs priced below the midpoint and had mixed trading
Tabula Rasa Healthcare (TRHC) priced below the range to raise $52 million and finished the week up 19% by Friday, slightly above its original midpoint. The provider of e-prescription and risk management services grew 45% in 2015 ($70 million), taking advantage of the shift to value-based care, but the company has faced various headwinds in its attempts to grow other lines of the business.
Fulgent Genetics (FLGT) took an even larger discount, dropping its price by 31% and raising just $38 million (25% from insiders). It traded up 2%, the latest in a series of disappointing diagnostics IPOs. Despite its growth and profitability, the genetic test company will still need to prove that it can scale.
MedEquities Realty Trust (MRT) raised $239 million by pricing at the low end of the range, before breaking issue. Led by an experienced management team, the REIT came public at a 7% yield, slightly above its peer average, which may have been offset by higher tenant and geographic concentration than its larger and more diversified competitors.
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US IPO Pipeline Update
Six notable US IPO filings hit this past week, five of which expect to raise $100 million or more. Chinese logistics company ZTO Express (ZTO) set its deal size at $1.5 billion, the year's largest initial filing. Two tech companies filed to raise $100 million: BlackLine (BL), a Silver Lake-backed SaaS platform, and Quantenna Communications (QTNT), a fast-growing fabless chip company. Two large biotechs also filed. Recently formed by the team behind Axovant Sciences (AXON; June 2015 IPO), Myovant Sciences (MYOV) filed to raise $173 million. Ra Pharmaceuticals (RARX), which boasts backing from RA Capital, NEA and others, filed to raise $86 million. Playa Hotels & Resorts (PLYA), an owner of all-inclusive beach resorts, filed for an estimated $300 million IPO. The October IPO calendar also saw several launches this past week.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 2% year-to-date, while the S&P 500 is up 8%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA) and Citizens Financial Group (CFG). The Renaissance International IPO Index is down 1% year-to-date, compared to +5% for ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Recruit Holdings and Aena S.A. To find out if this is the best ETF for you, visit our IPO Investing page.
