Average first day pops ranged from -41% to +41% as nine deals raised a combined $2.1 billion this week. High-end software provider Altair was the top performer, returning 41% on its market debut, as investors valued its sticky customer base and track record of profitability. On the other end of the spectrum, Funko fell 41% on its first day, marking the worst first day performance in 17 years.
Despite this week's mixed performance, aftermarket returns have improved from last week. The average aftermarket return for IPOs over the past 90 days rapidly deteriorated in October, but has since recovered to -5% as of November 3. Year-to-date, 62% of IPOs are trading above issue, up from 57% last week.
| 9 IPOs During the Week of November 3rd, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 11/3 |
| Altair Engineering (ALTR) | $156 | $933 | +8% | +41% | +49% |
| Provides high-end enterprise-class engineering software. |
|||||
| Loma Negra (LOMA) | $840 | $2,265 | +12% | +12% | +13% |
| Leading Argentine cement producer. |
|||||
| Evoqua Water Technologies (AQUA) | $500 | $2,182 | 0% | +16% | +13% |
| Provides water treatment systems and services. |
|||||
| ACM Research (ACMR) | $11 | $95 |
-34% | +8% | +8% |
| Sells single-wafer wet cleaning equipment to semiconductor manufacturers. | |||||
| Aquantia (AQ) | $61 | $312 | -18% | +6% | +6% |
| Fabless provider of high-speed (10Gbps+) Ethernet ICs. | |||||
| Sentinel Energy Services (STNLU) | $300 | $375 |
0% | +1% | +1% |
| Blank check company created by former Schlumberger executives to acquire an energy business. | |||||
| Spero Therapeutics (SPRO) | $77 | $207 |
-7% | -18% | -17% |
| Developing treatments for drug-resistant bacterial infections. | |||||
| Allena Pharmaceuticals (ALNA) | $77 | $307 |
-7% | -29% | -30% |
| Developing enzymes for rare and severe metabolic and kidney disorders. | |||||
| Funko (FNKO) | $125 | $573 | -20% | -41% | -42% |
| Designs and sells licensed pop culture figures, collectibles and accessories. |
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Altair Engineering (ALTR), which provides high-end enterprise-class engineering software, raised $156 million by offering 12 million shares (67% primary) at $13, the high end of the $11 to $13 range. The stock popped 41% on its first day and ended the week up 49%, which reflects investor demand for high-quality growth and proven business models with track records of profitability. The company also came to market without any VC-backing.
Funko (FNKO), the maker of Pop! collectibles, raised $125 million by offering 10.42 million shares (100% primary), down from 13.3 million (13% insider), at $12, well below its target range of $14 to $16. The stock traded down 41% on its first day as the sustainability of the company's mid-teens growth remained unclear and investors were likely turned off by insider dividends funded with high-coupon debt.
Loma Negra (LOMA), an Argentine cement producer, raised a total of $954 million in its global IPO ($840 million raised in the US offering). The company traded up 12% on its first day given its relatively high liquidity and outsized growth prospects.
Evoqua Water Technologies (AQUA), which provides water treatment systems and services, priced at the midpoint of the range (insiders sold 70% of the deal) to raise $500 million. The stock traded up 16% on its first day, on the heels of a 3Q17 strong earnings report from close peer Xylem (NYSE: XYL).
Chip equipment maker ACM Research (ACMR) raised $11 million by offering 2 million shares well below the target range. The company traded up 8% on its market debut.
Aquantia (AQ), a VC-backed fabless semiconductor company, raised $61 million and traded up 6% on its first day. The company stands to benefit from an industry-wide upgrade to multi-gigabit Ethernet connectivity, but will also face competition from much larger players. Its two largest customers, Intel and Cisco, represent 92% of 1H17 sales.
Backed by Atlas Venture, S.R. One and Google Ventures, Spero Therapeutics (SPRO) raised $77 million and traded down 18% on its first day. Insiders indicated an interest in purchasing $30 million (43%) on the offering. The biotech is developing formulations of existing antibiotics for multi-drug resistant (MDR) Gram-negative infections, which has the potential for broad applications, but face significant competition from many deep-pocketed pharmas with late-stage trials.
Allena Pharmaceuticals (ALNA), which is developing enzymes for rare and severe metabolic and kidney disorders, raised $75 million in its IPO offering. Insiders indicated an interest in purchasing up to $25 million (31%) of the deal. Allena's lead candidate would be the first treatment for hyperoxaluria, and could become a commercial success given its sizable addressable market. However, the company is still in negotiations with the FDA regarding the exact design and endpoints of its upcoming Phase 3 trial.
Sentinel Energy Services (STNLU), a blank check company created by former Schlumberger executives to acquire an energy business, raised $300 million and traded up 1% on its first day.
IPO Pipeline Update
Early-stage Chinese lending platform Senmiao Technology (AIHS) filed on Monday to raise up to $20 million in an initial public offering. Blank check company Leisure Acquisition (LACQU) also filed to raise $250 million; the company is led by gaming veteran Lorne Weil, who made an acquisition with his prior SPAC (INSE) in 2016.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 33.6% year-to-date, ahead of the S&P 500, which is up 15.2%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include First Data (FDC) and Square (SQ). The Renaissance International IPO Index is up 27.1% year-to-date, while the ACWX is up 22.8%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Japan Post and ABN AMRO Group. To find out if this is the best ETF for you, visit our IPO Investing page.
