Snap priced above the range and popped 44%, ending the week with a 59% gain. Its $3.4 billion offering made it the largest US tech company to go public since Facebook in 2012. While Snap is a unique company in many ways, investors embraced its growth despite near-term losses. Other tech unicorns MuleSoft (MULE) and Alteryx (AYX) should be next, with more tech IPO filings to come. Private equity leads the week ahead.
Snap has massive earnings potential years out, and at its current valuation of $38 billion, every quarter will be critical in demonstrating its ability to grow users and ramp up monetization. After a hiccup in user 4Q16 user growth, investors now look to 1Q17 numbers. Much of the deal was reportedly bought by several large institutions, some saying as much as 90%, and news broke on Friday that media giant NBCUniversal took a $500 million stake (15% of IPO). This likely contributes to its initial volatility.
Alternative asset manager Hamilton Lane (HLNE) priced at the midpoint and traded up 17% by Friday. Most of its revenue is from management fees, giving it a stable earnings base, while the company has grown its AUM at a 12% CAGR since fiscal 2012. However, asset managers are seeing their fees compressed industry-wide, a key risk for Hamilton Lane.
| 2 IPOs Priced During the Week of February 27, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
IPO Market Cap ($mm) |
Price vs. midpoint |
First day return |
Return at 3/3 |
| Snap (SNAP) |
$3,400 | $24,128 | +13% | +44% | +59% |
| Provides a mobile app, Snapchat, for ephemeral messaging and photo sharing. |
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| Hamilton Lane (HLNE) | $190 | $824 | 0% | +13% | +17% |
| Alternative asset manager with $40 billion of AUM. |
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IPO Pipeline Update
It was a slow start to the month, as just two companies submitted new filings this week. Gardner Denver Holdings (GDIM.RC) filed to raise an estimated $800 million. Adding to the growing list of oilfield services companies that have filed so far this year, Select Energy Services (WTTR) filed for a $100 million IPO. A fracking services provider, FTS International (FTSI) updated financials for 2016.
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| 2 IPO Filings During Week of February 27 | |||||
| Issuer Business |
Deal Size ($mm) |
Sector | LTM Sales |
EBIT% | |
| Gardner Denver Holdings (GDIM.RC) |
$800 (est.) | Industrials | $1,939 | 5% | |
| Engineers and manufactures industrial systems and parts. |
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| Select Energy Services (WTTR) | $100 | Energy | $302 | -99% | |
| Provides water services for hydraulic fracturing. |
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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 up 9.7% year-to-date, while the S&P 500 is up 6.4%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include First Data (FDC) and TransUnion (TRU). The Renaissance International IPO Index is up 4.8% year-to-date, while the ACWX is up 6.0%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Aena and ABN Amro. To find out if this is the best ETF for you, visit our IPO Investing page.
