Five IPOs raised $1.4 billion this week, bringing the year's total up to 50 IPOs raising $15 billion. Set to be the week's largest offerings, two energy companies struggled: Antero Midstream GP broke issue while Liberty postponed. A mortgage REIT and three biotechs rounded out the week. With no high-profile growth names for investors to get excited about (e.g. FND: +75%, CLDR:+33%), the five deals averaged a return of -0.5%.
While this week's biotech and yield companies failed to impress, the Renaissance IPO Index continued to climb, gaining 3.3% this past week, compared to 0.6% for the S&P 500. The energy sector excluded, this is a receptive environment for IPOs, with the VIX Volatility Index well below its historical average.
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| 5 IPOs During the Week of May 1st, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 5/5 |
| KKR Real Estate Finance (KREF) |
$210 | $2,514 | -2% | +8% | +8% |
| KKR-managed mortgage REIT focused on commercial real estate debt. |
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| UroGen Pharma (URGN) |
$58 | $179 | 0% | +8% | +8% |
| Developing gel-based chemotherapies to treat urological cancers. |
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| Biohaven Pharmaceuticals (BHVN) |
$168 | $649 | +13% | +3% | +5% |
| Developing treatments for migraine and neurological disorders. |
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| Antero Midstream GP LP (AMGP) |
$875 | $4,375 | 0% | -6% | -5% |
| Owns GP interests in Appalachian midstream MLP Antero Midstream Partners. |
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| Ovid Therapeutics (OVID) |
$75 | $399 | -6% | -18% | -18% |
| Early stage biotech developing treatments for rare neurodevelopmental disorders. |
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Low-energy debuts: Antero Midstream breaks, Liberty postpones
Antero Midstream GP LP (AMGP) priced at the midpoint and raised $875 million in the year's third-largest offering, but fell 6% on its first day. The company represents a levered play on distributions from natural gas gatherer Antero Midstream Partners LP (AM; 2014 IPO). The IPO likely suffered from poor sector sentiment and a yield that will remain below its peers for several years. However, energy investors with a positive outlook could be attracted to the distribution growth expected in 2017-2020.
Billed as the "Best Damn Fracking Company" (BDFC), Liberty Oilfield Services postponed its IPO, the year's first non-biotech to do so, even after slashing its proposed price from $17.50 to $12.50. Investors will likely remain extremely cautious about new energy company until oil prices stabilize, and Liberty had relatively aggressive expansion plans. The two other 2017 fracking IPOs, Keane Group (FRAC) and ProPetro (PUMP), are both below their IPO prices.
While energy IPOs struggled, energy-focused blank check company TPG Pace Energy Holdings (TPGEU) was able to raise $600 million, as expected. It traded up 1%. SPACs are excluded from our IPO stats.
Yield takes the field: KKR's REIT gains 8%
KKR Real Estate Finance Trust (KREF) raised $210 million by pricing at the $20.50 low end (~5.5% yield), before trading up 8% on Friday. Risks include portfolio concentration and a limited operating history, though the company has posted a strong ROE, and record-level commercial debt maturities in 2017 should offer growth opportunities. Going forward, KKR will have to compete for these assets with other PE groups, including a larger commercial mortgage REIT from TPG (TRTX) in the IPO pipeline.
Three biotechs produce anemic returns
Biohaven Pharmaceuticals (BHVN) priced an upsized offering above the range to raise $168 million, more than 96% of biotech IPOs in the past 10 years. Of these, only one in ten priced above the range, producing an average first-day return of +64%, though Biohaven traded up just 3% on day one. The deal was 32% covered by existing investors. It targets the multi-billion market for migraines with its Phase 3 candidate, though several much larger competitors are further along.
The week's smallest deal, UroGen Pharma (URGN) gained 8% after offering additional shares. The Israeli biotech's lead candidate delivers chemotherapy through its proprietary gel, and concerns over adoption and competition were likely eased by some strong early results. Insiders had indicated on $20 million (34%). Ovid Therapeutics (OVID) priced at the low end to raise $75 million, and proceeded to plummet 16% on its IPO, the year's fourth-worst debut. Ovid has not yet completed a clinical trial for its in-licensed lead candidate, which in 2007 failed to produce positive results for a different indication. Insiders indicated on $20 million (27%).
IPO Pipeline Update: 4 new filers
Advantage Solutions (ADV), a sales and marketing firm LBO'd by CVC and Leonard Green, filed for an IPO that could raise $800 million. Nine Energy Service (NINE) filed to raise an estimated $300 million; backed by SCF Partners, it provides well completion services similar to recent successful IPO NCS Multistage (NCSM; +18% from IPO). Despite news of a direct spinoff to shareholders, chemicals company Huntsman is taking its pigments business public through an IPO: Venator Materials (VNTR) filed to raise $100 million. ShotSpotter (SSTI), which provides a sensor-based service for detecting gunshots, filed to raise $35 million.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 18.7% year-to-date, far ahead of the S&P 500, up 7.2%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Ferrari (RACE) and TransUnion (TRU). The Renaissance International IPO Index is up 13.3% year-to-date, while the ACWX is up 12.8%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include ABN Amro and Covestro. To find out if this is the best ETF for you, visit our IPO Investing page.
