Six companies went public, making it the year's second most-active week. Coupa Software was the latest software IPO to price above its range and pop on the first day (+85%) as IPO investors continue to embrace high growth and strong margins, offered at a discount to public peers. Three large PE-backed IPOs also traded up this week (12% on average), while the week's two smallest deals ended near their IPO price.
80% of 2016 IPOs are trading above their offer price, compared to one year ago, when 43% of the year's IPOs were positive.
| 6 IPO Pricings - Week of October 3rd, 2016 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap ($mm) |
Price vs. midpoint |
First day return |
Return at 10/7 |
| Coupa Software (COUP) |
$133 | $1,041 | 20% | +85% | +65% |
| Provides cloud-based software that helps enterprises manage their spend. |
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| AquaVenture Holdings (WAAS) | $117 | $457 | -5% | +22% | +22% |
| Operates nine desalination plants and leases water purification systems. |
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| Advanced Disposal (ADSW) | $347 | $1,533 | -8% | +11% | +11% |
| Vertically integrated provider of solid waste collection and disposal services. |
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| Camping World Holdings (CWH) | $250 | $1,836 | 0% | +2% | +2% |
| Largest RV retailer in the US with 120 stores and a membership platform. |
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| Everspin Technologies (MRAM) | $40 | $103 | -33% | +0% | +0% |
| Provides magnetoresistive random access memory (MRAM) chips. |
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| Obalon Therapeutics (OBLN) | $75 | $267 | 0% | +0% | +0% |
| Commercializing an intragastric balloon device designed to assist with weight loss. |
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Coupa Software (COUP) continued the tech sector's rebound by pricing above the range and popping 85% on its first day. The hot tech IPO reached as high as $41 (+128%) in intraday trading, but finished Friday below $30 (+65%). The provider of spend management software offered IPO investors fast growth in a large market, priced attractively below public peers.
AquaVenture Holdings (WAAS) priced at the low end to raise $117 million, and popped 22%. Targeting secular demand for potable water internationally and point-of-use (POU) filtration systems domestically, AquaVenture has expanded its business aggressively through acquisitions, desalination plant expansions and new plant builds. While it faces customer concentration risks in the desalination business, it has the advantage of operating under 10-20 year contracts, providing for high revenue visibility. Given the fragmentation in the desalination and POU industries, it should have plenty more acquisition opportunities in the future.
Advanced Disposal (ADSW) raised $347 million by pricing at the low end of the range. Though operating in a relatively stable, albeit slow-growing market and growing EBITDA consistently, the waste management firm’s large debt burden (4.9x LTM adj. EBITDA) may have concerned potential investors. It has however managed to deleverage slightly since its postponed IPO attempt in February and plans to further pay down debt going forward.
Camping World Holdings (CWH) raised $250 million by pricing at the midpoint and traded up just 2%. Led by entrepreneur and reality TV star Marcus Lemonis, Camping World is the largest US retailer of new and used RVs, accessories, parts and services. The company boasts relatively strong organic growth (5-9%) for its size ($3.5 billion in LTM sales), much of which is recurring revenue. However, with US RV sales approaching their prior cyclical peak, investors may have been concerned with the risks of a sharp industry downtown.
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Everspin Technologies (MRAM) slashed its offer price and raised $40 million, but only traded up 0.3% on its debut. While it is the only commercial provider of magnetoresistive random access memory, its newest second-generation product has yet to gain much traction since its commercial launch in 2014.
Obalon Therapeutics (OBLN) raised $75 million by pricing at the midpoint (15% insider buying, down from 27%). The obesity balloon maker failed to pop, ending the week at its $15 offer price. US obesity represents a large (albeit competitive) market, but Obalon's intragastric balloon system has no track record in the US and is not currently covered by third party payors.
Pipeline Update
Three companies submitted filings this week. Chinese data center services provider GDS Holdings (GDS) filed to raise $200 million. Clipper Realty (CLPR), a REIT focused on apartments and commercial buildings in the New York metro area filed for a $100 million IPO. Finally, Mota Group (MOTA) which sells drones, toys and accessories filed to raise $23 million. In addition, four companies launched this week, including pipe producer Forterra (FRTA), oilfield service provider Mammoth Energy Services (TUSK), gene-editing biotech CRISPR Therapeutics (CRSP) and fast-growing cardiac diagnostic company iRhythm Technologies (IRTC).
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up almost 1% year-to-date compared to the S&P 500's +5%, though the IPO Index outperforms over the past 3 months. 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 +4% for 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.
