Three IPOs raised $443 million this past week. IPO buyers showed price sensitivity on each deal, but were rewarded with positive returns. The two technology IPOs each popped over 20%, with fast-growing software provider Appian in the lead, while LBO'd cable company WideOpenWest broke on day one but recovered by Friday.
| 3 IPOs During the Week of May 22th, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 5/26 |
| Appian (APPN) |
$75 | $755 | 0% | +25% | +43% |
| Provides a low-code app development platform with a focus on business processes. |
|||||
| SMART Global Holdings (SGH) |
$58 | $237 | -21% | +22% | +20% |
| Leading provider of memory modules for smartphones and computers in Brazil.. |
|||||
| WideOpenWest (WOW) |
$310 | $1,454 | -19% | -3% | +3% |
| Sixth largest US cable operator, serving the Midwest and Southeast. |
|||||
Coding the Appian way: Software IPO gains 43%, continuing streak
Appian (APPN) raised $75 million and became the year's first sizable software IPO to not price above the midpoint, but its 43% gain is right in line with the rest of this group. Backed by Novak Biddle and NEA, Appian's low-code software development platform has won over major customers (Goldman Sachs, US Army), growth is set to accelerate, and it has demonstrated an ability to deliver near-breakeven cash flow. The company was well-received despite showing 2016 sales growth and gross margin below the year's other major software IPOs. That gives the tech companies in our private backlog yet another positive data point showing IPO investors' willingness to bet on growth, provided it comes at a reasonable valuation. A low float-to-market cap appears to help as well.
Get SMART IPO: Semiconductor company jumps 20%
SMART Global Holdings (SGH) raised $58 million after pricing its IPO at $11, well below the proposed $13-$15 range. After adding insider buying from PE backer Silver Lake (28% of the deal), the Brazilian semiconductor manufacturer traded up 20% to just over $13. While its original midpoint was already below most peers, investors likely demanded a greater IPO discount given the recent volatility in Brazil caused by a presidential scandal.
WOW fails to wow investors; cable provider up 3%
WideOpenWest (WOW) raised $310 million by offering fewer shares at $17, below its range of $20-$22. It broke issue on its debut, but finished the week up 3%. LBO'd by Avista Capital Partners in 2005, cable cutting trends likely cut into its valuation. With a heavy debt burden, stagnant growth and a history of negative free cash flow, investors demanded a solid discount to get on board.
Three new filings: REITs and energy
Three companies were added to the IPO pipeline this past week. Ranger Energy Services (RNGR) filed to raise $100 million, joining the several other energy services companies on file. Granite Point Mortgage REIT (GPMT) filed to raise $100 million; fellow commercial mortgage REIT KKR Real Estate Finance (KREF) is up 11% from its May IPO, while TPG RE Finance Trust (TRTX) is on file. The third filer, Four Springs Capital Trust (FSPR), a diversified REIT, is aiming to raise $50 million.
New IPO filing activity has recently declined, particularly among tech companies, despite the sector's strong performance year-to-date (+27%). However, market conditions are becoming too good to ignore an IPO exit. The VIX Volatility Index is strikingly low, the year's average IPO is up +16%, and the Renaissance IPO Index has gained 21% year-to-date. These factors should drive a pick-up in activity after Memorial Day.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 20.9% year-to-date, far ahead of the S&P 500, up 7.9%. 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 14.3% year-to-date, while the ACWX is up 14.4%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Worldpay and ABN Amro. To find out if this is the best ETF for you, visit our IPO Investing page.
