The unicorn class just breathed a sigh of relief. Dropbox, once the poster child for excessive private valuations, priced above its range at $21 and then popped 36%. The most highly-valued tech IPO since Snap, Dropbox boasts over $1 billion in annual sales, paired with fast growth and expanding margins. The takeaway: Expect more tech.
Broader markets dropped. This past week, the IPO Index traded off -3.6% and the S&P 500 fell -6.0%. The VIX Volatility Index surged to about 25, the point at which IPOs start postponing.
Two IPOs did postpone this week: Israeli biotech PolyPid and blank check company Terrapin 4. And even with new tariffs roiling Chinese stocks, two deals from China were completed: Sunlands Online Education (STG; -3%) and micro-cap fintech Golden Bull (DNJR; +16%).
3 IPOs During the Week of March 19th, 2018 | |||||
---|---|---|---|---|---|
Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 03/23 |
Dropbox (DBX) | $756M | $9,437M | 24% | +36% | +36% |
Leading web-based cloud storage and collaboration platform. | |||||
Golden Bull (DNJR) | $6M | $58M | -6% | +16% | +16% |
Provides a peer-to-peer lending platform in China for auto-secured loans. | |||||
Sunlands Online Education (STG) | $150M | $1,996M | -8% | -3% | -3% |
A leading provider of online courses for degree-equivalent exams in China. |
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Out of the box: Dropbox's down-round leads to an up IPO
Dropbox (DBX) raised $756 million (25% insider) by pricing above the upwardly-revised range. Its $9.4 billion IPO market cap was still a down-round to the $10 billion valuation it received privately in 2014, but those Series C investors ended the day with a gain. Its stock closed at $28.48, a strong gain of 36%, but still below its opening price. Salesforce invested $100 million in a concurrent private placement, days after announcing its $6.5 billion acquisition of 2017 software IPO MuleSoft (MULE)
We don't need no (Sunlands Online) Education
Chinese online course provider Sunlands Online Education Group (STG) raised $150 million at a $2.0 billion market cap by pricing at the low end. The stock initially popped over 20%, before deteriorating to a loss of -3%. The extremely fast growing company is also extremely unprofitable.
Two IPOs postpone: A biotech and a blank check
Israeli biotech PolyPid (POLY) postponed its $75 million IPO, citing market conditions. Some recent biotechs have pulled back, and the prevention of surgical site infections is not an especially hot area. Blank check company Terrapin 4 Acquisition (TRTLU), led by Nathan Leight, reduced its proposed offering to $200 million and ultimately postponed; investors may be cautious given the recent performance of Yatra Online (Terrapin 3).
IPO Pipeline Update: 8 new filers including Dell's Pivotal Software
8 Filings During the Week of March 19th, 2018 | |||
---|---|---|---|
Issuer Business |
Deal Size |
Sector | Lead Underwriter |
FirstCaribbean Bank (FCI) | $300M | Financials | Barclays |
Leading bank in Barbados, the Bahamas and Cayman Islands spun out of CIBC. | |||
Level One Bancorp (LEVL) | $25M | Financials | Raymond James |
Michigan-based commercial bank with $1.3 billion in assets. | |||
Mereo BioPharma (MREO) | $81M | Health Care | Cowen |
Commercializing a portfolio of rare disease drugs acquired from large pharmas. | |||
Pivotal Software (PIVI.RC) | $500M | Technology | Morgan Stanley |
DellEMC spin-off providing a platform for enterprises to manage cloud-based apps. | |||
Surface Oncology (SURF) | $75M | Health Care | Goldman |
Clinical-stage biotech developing next generation antibody cancer therapies. | |||
MorphoSys (MOR) | $150M | Health Care | Goldman |
Licensing antibodies to pharmas and developing its own therapy for lymphoma. | |||
Pure Acquisition (PACQU) | $300M | SPAC | Oppenheimer |
Blank check company formed and led by oil and gas veteran Jack Hightower. | |||
GrafTech International (EAF) | $100M | Materials | JP Morgan |
Vertically-integrated manufacturer of graphite electrodes used in steelmaking. |
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 1.3% year-to-date and the S&P 500 is down 3.2%. 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 3.4% year-to-date, while the ACWX is down 2.8%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.