Eight US IPOs raised $3.3 billion this week, including four Chinese deals and three biotechs. iQIYI raised $2.3 billion, making it the largest Chinese IPO since Alibaba in 2014. This week also had some of the quarter's worst trading. Six of the eight broke issue on day one and finished with a negative return. Only a bank and a biotech traded up.
1Q18 Review: A Big Quarter for IPOs, in the US and Abroad
On Monday, Renaissance will release its 1Q 2018 US IPO Review, Mega Deals Drive Biggest First Quarter in a Decade, to IPO Pro subscribers. The quarter's 44 IPOs raised $15.6 billion. Four billion-dollar IPOs drove proceeds to a multi-year record, while the technology sector has quickly picked up steam with high activity and strong returns. We will also also publish a preview of our the 1Q 2018 Global IPO Review, Active Global IPO Market Despite Rising Volatility.
| 8 IPOs During the Week of March 26th, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 03/29 |
| Homology Medicines (FIXX) | $144M | $602M | 7% | +17% | +17% |
| Preclinical biotech developing a gene therapy delivery platform for rare diseases. | |||||
| OP Bancorp (OPBK) | $22M | $175M | 5% | +11% | +13% |
| California commercial bank primarily serving Korean-American communities. | |||||
| OneSmart Education (ONE) | $179M | $1,836M | -8% | -2% | -2% |
| Provides premium K-12 after-school tutoring in China. | |||||
| Bilibili (BILI) | $483M | $3,203M | 0% | -2% | -4% |
| Provides an anime-themed video sharing and mobile gaming platform in China. | |||||
| Genprex (GNPX) | $6M | $75M | 0% | -6% | -6% |
| Developing gene-based nanoparticle therapies to treat cancer. | |||||
| Unum Therapeutics (UMRX) | $69M | $380M | -8% | -7% | -7% |
| Developing antibody-coupled T-cell receptor immunotherapies for cancers. | |||||
| GreenTree Hospitality (GHG) | $143M | $1,422M | -18% | -7% | -9% |
| Franchises over 2,000 economy and mid-scale hotels in China. | |||||
| iQIYI (IQ) | $2,250M | $13,673M | 0% | -14% | -14% |
| Chinese online video streaming platform owned by Baidu. | |||||
Red China: All Four Chinese IPOs Break
Markets tumbled this week, and Netflix and Chinese stocks were particularly hard hit - not great conditions for Chinese IPOs with online video platforms. Called the "Netflix of China," iQIYI (IQ) priced its $2.3 billion IPO at the midpoint and plummeted 14%. In the past 10 years, only three other $1+ billion IPOs have had double-digit losses on their debut (ADT, ZTO, GAME). While iQIYI is a large and fast-growing player in a large market, it is also losing billions of dollars in free cash flow.
China's leading anime-focused video platform, Bilibili (BILI) raised $483 million by pricing at the midpoint. It finished the week down 4%. The company boasts a large and highly-engaged audience, but has virtually no track record for monetizing that viewership. Most of its current revenue is from two online games.
After-school tutoring company OneSmart International Education (ONE) and hotel franchisor GreenTree Hospitality, both valued at over $1 billion, also stumbled out of the gate. All six of the quarter's Chinese IPOs raising $50+ million ended the quarter with negative returns (micro-caps DNJR, AIHS and SSLJ finished positive).
The FIXX is in: Homology gains 17% in week's best IPO
Homology Medicines (FIXX) raised $144 million - 44% more than expected - in the quarter's largest biotech IPO. The stock opened up 44% on Thursday, before settling to return of 17% by Friday's close. Backed by 5AM Ventures, ARCH VP and Deerfield, the preclinical biotech has a potentially massive market if its gene therapy delivery platform is more effective than the current standard.
Unum Therapeutics (UMRX) dropped 7%, the year's worst for a biotech. While immuno-oncology has been a hot space, investors may have been wary of the number of serious adverse events during its Phase 1 trials.
Bank on it: Another bank IPO trades up
California commercial bank OP Bancorp uplisted to the Nasdaq in a $22 million IPO and gained 11% on its debut. Relatively easy to value, all 12 bank IPOs since the start of 2017 now trade above issue.
IPO Pipeline Update: Spotify and Software IPOs
This week, Spotify released 2018 guidance ahead of its April 3 listing. Several software companies filed this week, signaling a pickup in April. These included VC-backed Smartsheet (SMAR) and DocuSign (DOCU) and PE-backed Ceridian HCM (CDAY), all of which should fetch $1+ billion IPO valuations.
| 5 Filings During the Week of March 26th, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| DocuSign (DOCU) | $400M | Technology | Morgan Stanley |
| Provides a cloud-based electronic signature platform. | |||
| CLPS (CLPS) | $14M | Technology | Benchmark |
| Chinese provider of turn-key financial technology solutions. | |||
| ASLAN Pharmaceuticals (ASLN) | $86M | Health Care | Leerink Partners |
| Singapore biotech developing cancer therapies using the HER pathway. | |||
| Ceridian HCM (CDAY) | $200M | Technology | Goldman |
| Provides enterprises with human capital management software. | |||
| Smartsheet (SMAR) | $100M | Technology | Morgan Stanley |
| Provides a spreadsheet-based work collaboration platform. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 2.0% year-to-date and the S&P 500 is up 0.5%. 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 4.1% year-to-date, while the ACWX is down 0.5%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.
