Four IPOs raised $816 million this week, led by Extraction Oil & Gas. The company broke a 2-year drought in IPOs from energy E&Ps and popped 15%, while the week's other three IPOs broke issue. Two had double-digit drops, the year's worst debuts outside the biotech sector. The last time one week had three IPOs end their first day negative was October 2015.
With 10 IPOs in two weeks, October is off to a solid start, but IPO returns tell a different story. Already six are below issue, compared to the 3Q16, which ended with just three of the quarter's 33 IPOs negative. The recent broken IPOs have mostly been smaller and riskier companies, the first to sell off when markets decline for two weeks straight (IPO Index down 2% over that time). The seven tech IPOs since September have held on to their outsized returns (+40%), but most have traded down after day one. Despite the recent pullback, the average 2016 IPO is still up 30%, with 74% above issue.
| IPO Pricings Week of October 10th, 2016 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap ($mm) |
Price vs. midpoint |
First day return |
Return at 10/14 |
| Extraction Oil and Gas (XOG) | $633 | $2,912 | +15.2% | +15.0% | +14.6% |
| Oil and gas E&P operating in the Denver-Julesburg Basin | |||||
| Mammoth Energy Services (TUSK) | $116 | $567 | -9.1% | -11.6% | -11.6% |
| Provides oilfield services in the Utica Shale and Permian Basin | |||||
| Azure Power Global (AZRE) | $61 | $468 | -18.2% | -18.9% | -23.6% |
| Indian low-cost solar power producer with 357 MW of capacity | |||||
| AzurRX Biopharma (AZRX) | $5 | $53 | -21.4% | -0.4% | -4.4% |
| Developing non-systemic biologics for gastrointestinal disorders |
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Extraction Oil and Gas (XOG) - The first E&P IPO in over two years made headlines by pricing above its range to raise $633 million, and its stock popped 15% on day one. Extraction had raised $900 million as a private company, which helped it acquire over 100,000 net acres in Colorado's Denver-Julesburg Basin. After a large acquisition in October, it plans to use IPO proceeds to accelerate drilling activity. The company highlights its strong production economics, even when oil is as low as $40 per barrel, which should help it continue its fast production growth.
Mammoth Energy Services (TUSK) - The week's other oil and gas play priced at the low end and dropped 12%. Formed with private equity and E&P assets in 2014, Mammoth offers a suite of oilfield services, such as fracking and drilling. Oilfield services companies were pummeled by low energy prices in 2015, but the sector has recovered this year. Despite pricing below most of its public peers, Mammoth's disappointing debut could have been due to high customer concentration, particularly with a related party, as well as oversupply in the industry.
Azure Power Global (AZRE) - The first Indian company to list in the US since 2013, Azure Power had originally targeted a $150 million IPO, but instead sold $75 million in a private placement and raised $61 million when it priced below the range. The low-cost solar power producer had a dark debut, sliding 19% on day one and finishing the week down 24%. It is the year's worst-performing IPO outside of the biotech sector. An early mover in an enormous market, Azure relies heavily on debt and government subsidies, while its rates have recently trended down.
AzurRX Biopharma (AZRX) - This gastrointestinal biotech finally came public this week, after setting terms in July and revising them twice in the interim. It raised just $5 million and ended the week down 4%.
While we do not include blank check companies in our IPO stats, Avista Healthcare Public Acquisition (AHPAU) raised $300 million and finished the week up 0.3%, similar to the returns of most SPACs.
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IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 2% year-to-date, while the S&P 500 is up 4%. 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 3% year-to-date, while ACWX is up 2%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include NN Group and Cheil Industries. To find out if this is the best ETF for you, visit our IPO Investing page.
