Two IPOs raised a combined $380 million this past week. Blank check company Capitol Investment Corp. IV led the way with a $350 million offering, and branded content curator Chicken Soup for the Soul Entertainment followed with a Reg A+ offering that raised $30 million. Filing activity remained slow with just two companies joining the pipeline, along with a handful of updates. We should see filing activity pick up in the coming week.
Year-to-date aftermarket returns slipped further this past week to -1.7%, with the average 2017 IPO up +7.7% from its offer price. 59% are trading above issue. Leading sectors are Consumer Discretionary and Industrials.
| 2 IPOs During the Week of August 14, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 8/18 |
| Capitol Investment Corp. IV (CIC.U) + | $350 | $438 | 0.0% | +0.2% | +0.4% |
| Blank check company formed and led by Mark Ein. |
|||||
| Chicken Soup for the Soul Entertainment (CSSE)*+ |
$30 | $144 | 0.0% | -22.9% | -22.9% |
| Creates and distributes video content under the Chicken Soup for the Soul brand. | |||||
Cold Stock: Chicken Soup’s Reg A+ IPO upsizes then trades down 23%
Chicken Soup for the Soul Entertainment (CSSE) raised $30 million in the largest-ever Reg A+ IPO at a market value of $144 million. The Cos Cob, CT-based company originally planned to raise $10.8 million. After trading up over +10% at the outset, it fell -23% on Friday, far worse than the other two major Reg A+ IPOs, ShiftPixy (PIXY; +28% on first day) and Adomani (ADOM; +45%).
Capitol Investment Corp. IV (CIC.U), the fourth and largest blank check company led by private equity deal maker Mark Ein, raised $350 million. The company did not disclose a target industry or geography. Ein’s prior SPACs acquired Two Harbors Investment Corp. (NYSE: TWO), Lindblad Expeditions (Nasdaq: LIND) and Cision (NYSE: CISN).
In other SPAC news, 1Q17 IPO Silver Run Acquisition II (SRUNU), tied for the largest SPAC IPO of the year, announced plans to merge with Alta Mesa Holdings, LP and Kingfisher Midstream, LLC to form a $3.8 billion energy company. Backed by Riverstone, Silver Run II should be the first 2017 SPAC IPO to complete a merger or acquisition. Aftermarket performance for 2017 SPAC IPOs (+1.5%) currently exceeds that of their non-SPAC counterparts (-1.7%) by 320 bps.
IPO Pipeline Update: A Latin American tech company and a Chinese biotech
Two foreign companies filed this past week, both with a potential valuation of more than $1 billion. The week also saw 2Q17 financial updates from Chinese logistics company Best (BEST.RC), newly-formed mortgage REIT Tremont Mortgage Trust (TRMT), large chemicals producer PQ Group (PQG), oilfield services provider Nine Energy Service (NINE) and motor fuel distributor GPM Petroleum LP (GPMP).
Despegar.com (DESP), a leading online travel agency in Latin America operating the Decolar and Despegar brands, filed for an IPO that we estimate could raise as much as $300 million. After cutting S&M spend in 2016 to focus on profitability, Despegar again invested in marketing in the 1H17, and revenue grew +28% to $249 million as adjusted EBITDA nearly tripled to $41 million (17% margin). Backed by Tiger Global, Despegar was valued close to $1.6 billion in 2015 when it took $270 million from strategic partner Expedia.
Zai Lab (ZLAB), a Chinese biotech focused on oncology, autoimmune and infectious diseases, filed to raise up to $115 million. The prior two China-focused biotechs to go public in the US, Athenex (ATNX) and Beigene (BGNE), are up 38% and 176% from their respective June 2017 and February 2016 IPOs. Zai Lab is reportedly targeting a valuation of $1 billion, and has a broad pipeline of drugs licensed from major pharmas, which it hopes to push through late-phase trials in China.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up +22.3% year-to-date, ahead of the S&P 500, which is up +8.34%. 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 +22.0% year-to-date, while the ACWX is up +15.9%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include ABN AMRO Group and Worldpay.
