As expected, the year's first unicorn was a winner. Cybersecurity provider Zscaler (ZS) priced well above its range and shot up 106% on its debut. That's good news for next week's Dropbox. Investors are paying up for growth, which should lure even more unicorns to market. This past week also saw the year's first bank IPO and the year's largest biotech by market cap.
Two decacorns dominated headlines this week. Dropbox (DBX) set its proposed IPO valuation at $7.6 billion, scheduled to trade late next week. Spotify (SPOT) hosted an investor day, setting a trade date for early April. This week it also revealed that private trading over the past two weeks has ranged from $49 to $125 per share.
| 5 IPOs During the Week of March 12th, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 03/16 |
| Zscaler (ZS) | $192M | $2,056M | 45% | +106% | +106% |
| Provides a cloud-based network security service for enterprises. | |||||
| Senmiao Technology (AIHS) | $12M | $102M | -6% | +41% | +41% |
| Early-stage Chinese marketplace for peer-to-peer lending. | |||||
| Arcus Biosciences (RCUS) | $120M | $643M | 7% | +13% | +17% |
| Clinical-stage biotech developing cancer immunotherapies. | |||||
| Bridgewater Bancshares (BWB) | $79M | $352M | 2% | +7% | +9% |
| Minnesota-based community bank focused on commercial real estate lending. | |||||
| Opes Acquisition (OPESU) | $100M | $129M | 0% | +0% | +0% |
| Blank check company formed by Axis Capital Management to acquire a Mexican business. | |||||
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Zscaler zips up 106% in best tech debut since 2016
Zscaler (ZS) priced at $16, a whopping 45% above its midpoint, and flew up 106% in the best first-day pop for a tech IPO since September 2016. It has strong fundamentals: fast growth, high gross margins, improving cash flow trends. And investors like a straightforward story. Software services are shifting to the cloud, and Zscaler is the fastest-growing player in its web security industry. At $33, though, it's now priced at a large premium to peers.
Arcus Biosciences (RCUS) priced an upsized IPO at the high end of the range. The early-stage biotech initially popped 46% but settled to a first-day gain of 13%. Immuno-oncology is hot, and the "generalist" investors have taken note. Arcus raised $120 million - half from insiders - at a $643 million valuation. There have been nine biotechs in 2018, and Arcus was the year's biggest by market cap. Immuno-oncology peers Syndax (SNDX), Jounce (JNCE), and ARMO (ARMO) have each traded up over 60% in the past three months.
Small-cap Minnesota bank Bridgewater Bancshares (BWB) raised $79 million at a market cap of $352 million. The year's first bank IPO traded up 10%, roughly in line with its peers. All 10 bank IPOs from 2017 trade above their offer price, with an average return of 28%.
Micro-cap Chinese lending platform Senmiao Technology (AIHS) priced a downsized US IPO at the low end of its range, raising $12 million at a market value of about $100 million. It popped over 40%. During the LTM period, it booked revenue of just $0.2 million.
One blank check company, Mexico-focused Opes Acquisition (OPESU), raised $100 million and finished flat.
IPO Pipeline Update: SaaS billings unicorn Zuora files
Valued at $1 billion in May 2015, Zuora (ZUO) filed to raise $100 million. The company facilitates cloud-based subscription payments. Alzheimer’s biotech Alzheon (ALZH) filed to raise $81 million. Trident Acquisitions (TDACU), an energy-focused blank check company, filed to raise $175 million.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 5.0% year-to-date and the S&P 500 is up 2.9%. 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 5.6% year-to-date, while the ACWX is up 1.0%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.
