The deals are still pouring in, and IPO investors are poring over them. Nine IPOs raised a hefty $3.3 billion this past week. Excluding a SPAC and a Reg A+, the average return was just 2%. The week's sole energy offering, FTS International, was the only IPO to price above the midpoint or achieve a double-digit return. Casino REIT VICI Properties raised $1.2 billion in the week's largest offering. Large airport businesses Hudson and Corporación América Airports both broke issue.
This week capped off the biggest January by IPO proceeds in over 25 years, as 17 deals raised $9.2 billion. The year's busy start continues in the week ahead with as many as 10 IPOs expected before a mid-February pause. However, this past week's sell-off in stocks, spike in the VIX Volatility Index and IPO pricing and trading all suggest that investors are not buying IPOs indiscriminately.
| 8 IPOs During the Week of January 29th, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 02/02 |
| FTS International (FTSI) | $351M | $1,916M | 9% | +15% | +15% |
| Vertically integrated provider of hydraulic fracturing for the oil and gas industry. | |||||
| Central Puerto (CEPU) | $330M | $2,243M | -15% | +7% | +7% |
| Largest private sector power producer in Argentina. | |||||
| VICI Properties (VICI) | $1,210M | $7,216M | 0% | +4% | +5% |
| Newly-formed triple-net REIT that leases properties to Caesars Entertainment. | |||||
| Sol-Gel Technologies (SLGL) | $75M | $224M | 0% | +14% | +3% |
| Developing topical acne creams that deliver treatment via microcapsules. | |||||
| MTech Acquisition (MTECU) | $50M | $65M | 0% | +1% | +1% |
| Blank check company formed to acquire a cannabis services business. | |||||
| America Airports (CAAP) | $486M | $2,720M | -19% | -4% | -2% |
| Operates 52 airports worldwide including 37 in Argentina. | |||||
| Hudson (HUD) | $749M | $1,758M | -5% | -7% | -5% |
| Operates airport concessions and duty-free stores across North America. | |||||
| One Stop Systems (OSS) | $19M | $72M | -29% | -2% | -6% |
| Manufactures computing systems for high speed processing. | |||||
| iPic Entertainment (IPIC) | $15M | $216M | 0% | -18% | -20% |
| Operates 16 combination movie theater and dining locations. | |||||
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Cool under pressure: Fracker FTS International gains 15%
FTS International (FTSI) raised $351 million - $101 million more than expected - by pricing a larger offering at the high end of the range. Sales soared in 2017, and its in-house maintenance gives it above-average EBITDA margins. Outside of the fundamentals, sector tailwinds and an attractive IPO valuation paved the way for FTS's successful offering.
Billion-dollar casino REIT gains 5%
VICI Properties (VICI) raised $1.2 billion in an upsized offering priced at the midpoint. Offering a 5.25% initial annual yield, VICI traded up 5%, valued in line with close peer and 2016 IPO MGM Growth Properties (MGP). The triple-net REIT has iconic properties with a large pipeline for growth, but remains heavily exposed to the Las Vegas gaming market.
Mixed trading out of Argentina
While investors have been bullish on Argentina, both of this week's Argentina plays came under pressure. Central Puerto (CEPU), one of the country's major power producers, priced a downsized $330 million offering below the range at $16.50, a valuation much closer to its peer average. The IPO initially broke issue, before it recovered to a 7% gain. Massive government contracts provide attractive growth potential, but those are subject to price controls and renegotiation.
Corporación América Airports (CAAP) priced its $486 million IPO well below the range at $17, and fell 2%. While valued at a discount to peers, the Argentine airport operator faces relatively low margins, high capex needs and regulatory hurdles in various South American markets.
Breaking news: Hudson News breaks
Hudson (HUD) priced at the $19 low end, giving it a market cap of $1.76 billion and raising $749 million for public parent Dufry. North America's leading travel retailer, Hudson Group's valuation appeared priced to perfection, and its stock fell 5%.
Sol-Gel interrupts biotech momentum
Bankrolled by an Israeli billionaire, Sol-Gel Technologies (SLGL) raised $75 million to take its prescription acne creams into Phase 3 trials. M&A has driven excitement in the biotech space and momentum carried Sol-Gel to a 30% gain near its open, but the stock then traded down to just a 3% return by week-end.
Little enthusiasm for 3 small deals: Luxury theaters, computing parts, cannabis SPAC
The year's first Reg A+ IPO, iPic Entertainment (IPIC) raised $15 million at a market cap of $216 million (2.5x LTM sales). iPic only offered about one-third of its max deal size at the proposed $18.50, before dropping to $14.80 by Friday (-20%). Its luxury theater concept has solid growth, but a slim 1% EBITDA margin and high debt.
One Stop Systems (OSS) added shares and priced below the range to raise $19 million at a $72 million market cap. It closed the week down 6%. The computer components supplier booked LTM sales of $27 million, growing at about 30% organically with a 4% EBITDA margin.
Blank check company MTech Acquisition (MTECU) raised $50 million and traded up 2%. The SPAC is led by Steven Van Dyke, a former hedge fund manager turned cannabis venture capitalist.
Airbnb "not going public in 2018" as CFO departs
Airbnb was a good bet for 2018's largest US IPO until this week, when its CFO left the company. Other "deca-corns" like Dropbox and Spotify are still on track for a 2018 listing, while Adyen's announcement that it won eBay's payments contract boosts its own prospects for a billion-dollar 2018 IPO.
IPO Pipeline Update: One micro-cap files ahead of February lull
With the IPO market's mid-February pause coming up, just one company filed this week. Llisted on the OTC, pre-revenue electric vehicle maker ElectraMeccanica Vehicles (ECCT.RC) plans to raise $28 million on the Nasdaq.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. After the week's market sell-off, the Renaissance IPO Index has returned -0.8% year-to-date and the S&P 500 is up 3.3%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Snap (SNAP) and US Foods (USFD). The Renaissance International IPO Index is up 5.1% year-to-date, while the ACWX is up 3.1%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.
