US equity markets are an attractive source of capital and liquidity, even for companies that are already listed on foreign exchanges or the OTC markets.
Frankfurt-listed MorphoSys (MOR) began trading on Thursday, and four more traded companies are currently scheduled to complete initial US offerings: Mereo BioPharma Group (MREO), Taiwan Liposome Company (TLC), ASLAN Pharmaceuticals (ASLN) and FirstCaribbean International Bank (FCI).
Since the start of 2014, there have been 50 IPOs* on the Nasdaq or NYSE from foreign or OTC-traded companies, or 7% of IPO deal flow. Biotechs made up 70% of cross-listings or up-listings by deal volume.
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Low First-Day Returns, and Micro-Caps Do Worse
As expected, these companies typically have far lower first-day returns than regular IPOs. The 50 that have priced in the past four years average a first-day gain of just 0.4%. About half traded within a band of -5% to +5% on the first day, with a quarter doing better or worse. From there, returns vary widely. However, the 10 that IPO'd with a market cap below $100 million underperformed (-10% on first day, -41% as of 4/17/18).
Top First-Day Gains: European Biotechs
Only 5 of the 50 returned over 13% on the first day, the historical average pop for a normal IPO. Each was a health care company listed in Europe, and priced below its prior close: Biotie Therapies (BITI; discount implied 3% upside), Argenx (ARGX; 2%), Ablynx (ABLX; 6%), Biofrontera (BFRA; 28%) and Galapagos (GLPG; 4%).
Largest Listings
Four IPOs have raised over $300 million: VICI Properties (VICI; $1.2B, -9% from Feb '18 IPO), Grupo Aval (AVAL; $1.1B, -33% from Sep '14 IPO), Israel Chemicals (ICL; $421M, -36% from Sep '14 IPO) and Central Puerto (CEPU; $330M, -2% from Feb '18 IPO).
Bottom Performers
As of 04/17/18, the worst performers have mainly been micro-caps. In general, the bottom 10 had especially poor returns on the first day, and traded down from there. Two larger Norway-listed offshore drilling companies landed in the bottom 10. Bottom performer Viggle (FNCX; now Function(X)) was the lowest-rated IPO of 2014 on IPO Intelligence.
| Bottom 10 IPOs from Cross-Listings and Up-listings, 2014-2018 |
|||||
|---|---|---|---|---|---|
| Company (Ticker) | IPO Date | Deal Size | IPO Mkt Cap |
First-Day Return |
04/17 Return |
| Function(X)/Viggle (FNCX) | 04/24/14 | $35M | $125M | -28% | -100% |
| North Atlantic Drilling (NADL) | 01/28/14 | $125M | $2,231M | -8% | -99% |
| EyeGate Pharmaceuticals (EYEG) | 07/30/15 | $10M | $81M | -16% | -94% |
| Nordic American Offshore (NAO) | 06/11/14 | $94M | $362M | -5% | -93% |
| BioPharmX (BPMX) | 06/24/15 | $10M | $64M | -4% | -92% |
| Valeritas Holdings (VLRX) | 03/22/17 | $53M | $96M | -29% | -79% |
| Corindus Vascular Robotocs (CRVS) | 05/28/15 | $42M | $487M | 5% | -69% |
| Xcel Brands (XELB) | 07/30/15 | $16M | $172M | -2% | -68% |
| Benitec Biopharma (BNTC) | 08/18/15 | $14M | $69M | -13% | -65% |
| AMERI Holdings (AMRH) | 11/17/17 | $6M | $71M | -15% | -64% |
Top Performers
Out of the 50 US listings, the nine best-performing IPOs were development-stage health care companies The top two IPOs were cross-listings from the Euronext Brussels: llama-derived antibody biotechs Argenx (ARGX) and Ablynx (ABLX). By and large, the cross/up-listings that outperformed also had the best first-day returns.
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*Unlike some firms, Renaissance tracks these offerings as IPOs, and in fact, most start their prospectus with the phrase "This is an initial public offering..." In some cases, however, existing volume is so robust that the US IPO looks no different from a follow-on offering. In other cases, a listed stock is so thinly traded that its price is not meaningful, and the US offering is the first major liquidity event.
