This week has been particularly weak for the IPO space. Three companies raised a combined $203 million and each broke issue. Coal producer, Contura (CTRA), pulled its IPO altogether. Broader markets traded down as the VIX Volatility Index closed a YTD high and 2017 aftermarket returns turned negative, now -1.5%.
Additionally, both Snap (SNAP) and Blue Apron Holdings (APRN) reported shaky earnings this
week, causing shares to plummet -12.5% and -12.4%, respectively. Snap's user growth and net losses came in below street expectations while Blue Apron guided to a revenue growth of less than 10% year-over-year for 2H17. Investors have clearly lost confidence in what were among the most highly anticipated deals this year, putting other "unicorns" on notice.
| 3 IPOs During the Week of August 7, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 8/11 |
| Zealand Pharma (ZEAL) | $78 | $546 | n/a | -0.3% | +0.2% |
| Licenses approved and investigational peptide-based treatments for diabetes. |
|||||
| Ranger Energy Services (RNGR) |
$85 | $217 | -14.7% | -1.9% | -1.9% |
| Provides well services for E&P companies across the US. |
|||||
| YogaWorks (YOGA) |
$40 | $92 | -57.7% | -11.8% | -11.8% |
| Operates 50 yoga studios in major US metropolitan markets. |
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Zealand Pharma (ZEAL), which licenses approved and investigational peptide-based treatments for diabetes, raised $78 million by offering 4.4 million ADSs at $17.87, below the as-converted price of its Nasdaq Copenhagen listing (ticker: ZEAL) of $18.71. Zealand returned -0.3% on its first trading day. Its peers have also traded poorly over the last several months due to expectations of a declining worldwide diabetes market.
YogaWorks (YOGA), the second-largest yoga studio chain in the US with 50 locations, raised $40 million by offering 7.3 million shares at $5.5. The company revived its IPO plans from July, but slashed its valuation in half--the biggest discount in over 2 years. It wasn't enough. YogaWorks traded down -11.8% on its first day as valuation still appears relatively high as compared to other high-growth retail concepts and management continues to pursue its capital-intensive consolidation strategy. PE sponsor, Great Hill Partners, planned to buy up to $15 million on the IPO (37% of the deal), up from $10 million originally.
Ranger Energy Sources (RNGR), which provides well maintenance and completion services for oil and gas E&Ps across the US, raised $85 million by offering 5.9 million shares at $14.50, below the $16 to $18 range. Despite coming at a sizable discount to peers and with $30 million of insider buying, the company traded down -1.9% on its debut, which is likely as a result of its limited operating history and skepticism around the energy sector in general. Ranger is the 12th energy name to come public this year; the group has posted an average first day return of +7.6%, but an average aftermarket return of -1.0%.
Contura Energy (CTRA), a coal producer formed out of Alpha Natural Resources' restructuring, had planned to raise $150 million this week, but withdrew its IPO. Investors were likely turned off by insider selling, while the coal industry also faces a high degree of uncertainty regarding prices and regulation.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 21.9% year-to-date, ahead of the S&P 500, which is up 9.0%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Ferrari (RACE) and First Data (FDC). The Renaissance International IPO Index is up 20.7% year-to-date, while the ACWX is up 15.3%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include ABN AMRO Group and Worldpay. Worldpay agreed to be acquired by Vantiv for over $10 billion this past week.
