This past week saw the last three IPOs of 2016 raise $735 million. IPO investors were stubborn until the end, as all three had to price at large discounts to public peers and below expectations. After hitting all time highs earlier in the week, markets absorbed the Fed's long-anticipated rate hike and the news of three potential increases next year.
The year ended with 105 IPOs raising $18.8 billion. While these figures mark the fewest IPOs since 2009 and the lowest proceeds since 2003, the deals enjoyed strong returns. The average 2016 IPO is up 24%, and 71% of deals are trading above their offer price.
| IPO Pricings for Week of December 12th, 2016 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap ($mm) |
Price vs. midpoint |
First day return |
Return at 12/16 |
| trivago (TRVG) |
$287 | $3,880 | -21.4% | +7.7% | +7.7% |
| Online global hotel search aggregator being spun out of Expedia. |
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| Wildhorse Resource Development (WRD) | $413 | $1,369 | -25.0% | +0.4% | -0.9% |
| Oil and gas E&P backed by Natural Gas Partners operating in TX and LA. |
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| TiGenix (TIG) | $36 | $213 | 0% | -24.5% | -9.6% |
| Developing injectable stem cell therapies for the treatment of perianal fistulas. |
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trivago (TRVG), raised $287 million by offering 26.1 million ADSs (31% insider) at $11, below the $13 to $15 range. While revenue has grown quickly (up 55% in the 3Q16 to $265 million), investors may be skeptical of the company's ability to grow profitably with 85% of revenue going to advertising in 2016. The deal had a low float of just under 7% of its market cap which may have helped bolster shares as it climbed 7.7%. It faces stiff competition in the space and two customers Expedia, which it is being spun out of, and Priceline, another competitor, were a combined 78% of 2016 sales.
WildHorse Resource Development (WRD), raised $413 million by offering 27.5 million shares at $15, well below the $19-$21 range. The valuation could reflect a discount investors are placing on execution risk with a large capex ramp. WildHorse is able to operate profitably at 94% of its inventory locations at just $45/Bbl oil, but has seen production fall 30% at its pending acquisition. WildHorse is the second E&P IPO of the year and operates primarily in the Eagle Ford Shale and Terryville Complex.
TiGenix (TIG), a Phase 3 developer of stem cell therapies, raised $36 million by offering a slightly downsized 2.3 million ADSs at $15.50, a 14% discount to the as-converted price of its Euronext Brussels-listed shares. TiGenix broke at the open and continued down to $11.70 though it regained ground on Friday and closed at $14.01. Its 24.5% first day slide was the worst of 2016.
The IPO pipeline
While there won’t be any more pricings this year, companies hoping to launch in the beginning of 2017 may file in the upcoming weeks. Cerberus-owned Keane Group (FRAC), a well services provider, filed for a $288 million IPO. Playa Hotels & Resorts (PLYA) announced a $1.75 billion merger with the TPG-backed SPAC Pace Holdings (PACEU), a 2015 IPO. Global for-profit education company Laureate Education (LAUR) and Latin American power producer IC Power (ICP) filed updated financials. Chinese semiconductor designer VeriSilicon (VERI.XX) withdrew its IPO filed in 2014.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is flat year-to-date, while the S&P 500 is up almost 11%. 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 7% year-to-date, while the ACWX is up 2%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Samsung C&T and Recruit Holdings.
