Growth IPOs are on a hot streak. This past week's IPOs continued the strong trading we've seen in the tech and health care sectors over the past 90 days. CarGurus and three medical device companies each had a strong debut, averaging a first-day pop of 45%.
The Renaissance IPO Index is up 32% year to date. IPOs over the past 90 days are up 35% on average and 79% are trading above issue. Tech deals have averaged a 30% return; health care continues to lead the way, averaging a 48% return in the period.
| 4 IPOs During the Week of October 9th, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 10/13 |
| CarGurus (CARG) | $150 | $1,798 | 14% | 72% | 78% |
| Online marketplace for buyers and sellers of new and used cars. |
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| OrthoPediatrics (KIDS) | $52 | $157 | 0% | 48% | 44% |
| Sells orthopedic devices specialized for children. |
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| Restoration Robots (HAIR) | $25 | $210 | -13% | 42% | 37% |
| Developing a robotic system to assist physicians in hair restoration surgery. |
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| OptiNose (OPTN) | $100 | $645 | 0% | 19% | 19% |
| Commercializing a drug-device nasal spray for chronic rhinosinusitis. |
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Online car marketplace CarGurus (CARG) priced above the range to raise $150 million at a $1.8 billion market value, then traded up 72% on its first day. While international expansion will drag margins in the near term, the company’s US business is well-positioned to generate strong cash flow. Its initial success is attributable to its large scale, high growth and profitability.
OrthoPediatrics (KIDS) raised $52 million at a $157 million market value. The company, which is the only maker of specialized children's orthopedic devices, traded up 48% on its first day. This likely reflects the company's IPO valuation; it came to market at a healthy discount to its peers. The company expects that its strong product pipeline and stable pricing will be able to drive and sustain future revenue growth.
Restoration Robotics (HAIR) is developing a medical device to help physicians complete hair restoration surgery. The company priced its $25 million IPO at the low end of its $7 to $9 range, and came to market with a fully diluted market value of $210 million and an enterprise value of $191 million (11x LTM sales). It traded up 42% on its first day.
OptiNose (OPTN) priced its upsized deal at the $16 midpoint to raise $120 million at a $645 million market value. The stock traded up 19% on its first day. The company is commercializing a breath-powered drug delivery system that it claims is more effective than traditional nasal sprays, and it has the potential to quickly gain traction with a 2Q18 targeted launch after receiving FDA approval in September. Private equity backer Avista had indicated an interest in purchasing $25 million of shares on the offering (21% of the deal).
US IPO Pipeline Update: 8 filings, headlined by China's Sogou
Sogou (SOGO), which is China's second-largest mobile search engine, filed to raise $600 million. In the 1H17, the company grew revenue 16% to $373 million while gross margin contracted nine points to 48%. Chinese peer-to-peer lending platform, PPDAI Group (PPDF) filed to raise $350 million. A third Chinese company, after-school math tutoring services provider Four Seasons Education (FSE.RC), filed to raise $120 million. Software API provider Bandwidth (BAND) filed to raise $85 million. Texas commercial bank CBTX (CBTX) filed to raise $119 million. Apellis Pharmaceuticals (APLS), which is developing a protein inhibitor for autoimmune and inflammatory diseases, filed to raise $150 million. Another biotech developing a protein inhibitor for inflammation, Fireman B.V. (IFRX), filed to raise $86 million. Lastly, real estate SPAC Big Rock Partners Acquisition (BRPAU), filed to raise $50 million.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 31.9% year-to-date, ahead of the S&P 500, which is up 14.0%. 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 28.5% year-to-date, while the ACWX is up 22.6%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include ABN AMRO Group and Covestro.
