Six companies are scheduled to raise a combined $1.3
billion in the week ahead. Digital signature unicorn
DocuSign (DOCU) headlines the week, combining high sales, fast growth and positive cash flow. It, Ceridian HCM (CDAY) and Smartsheet (SMAR) are each pitching their software platforms at $1+ billion valuations, continuing with the recent pickup in tech IPOs. The tech sector is the clearest bright spot of the 2018 IPO market. We'll see if that holds up this week. Other deals include a laser manufacturer, a personal
lines insurance brokerage and a small biotech.
| U.S. IPO Calendar | |||
|---|---|---|---|
| Issuer Business |
Deal Size Market Cap |
Price Range Shares Filed |
Top Bookrunners |
| Ceridian HCM (CDAY) Minneapolis, MN |
$420M $2,753M |
$19 - $21 21,000,000 |
Goldman JP Morgan |
| Provides enterprises with human capital management software. | |||
| DocuSign (DOCU) San Francisco, CA |
$543M $4,676M |
$24 - $26 21,700,000 |
Morgan Stanley JP Morgan |
| Provides a cloud-based electronic signature platform. | |||
| Goosehead Insurance (GSHD) Westlake, TX |
$128M $525M |
$14 - $16 8,530,000 |
JP Morgan BofA ML |
| Operates and franchises personal lines insurance agencies in the US. | |||
| nLight (LASR) Vancouver, WA |
$76M $533M |
$13 - $15 5,400,000 |
Stifel Raymond James |
| Leading manufacturer of high-power semiconductor and fiber lasers. | |||
| Smartsheet (SMAR) Bellevue, WA |
$128M $1,204M |
$10 - $12 11,632,950 |
Morgan Stanley JP Morgan |
| Provides a spreadsheet-based work collaboration platform. | |||
| Taiwan Liposome Co. (TLC) Taipei City, Taiwan |
$35M $246M |
$7.46 4,691,689 |
Cantor Fitz. |
| Developing lipid formulations of approved drugs for pain and eye disease. | |||
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DocuSign (DOCU), the world’s top e-signature solution, aims to raise $542 million at a $4.7 billion market cap. Venture-backed DocuSign targets an estimated $25 billion market. It offers over 300 pre-built integrations with Google, Microsoft, SAP and Oracle to its more than 370,000 customers. While revenue growth has recently decelerated, its 36% growth to over $500 million in sales along with its positive free cash flow should attract investors. Insiders are selling 26% of the deal.
Ceridian HCM Holding (CDAY), which offers a human capital management platform to enterprises, is targeting $420 million at a $2.8 billion market value. LBO’d in 2007, this legacy payroll processor acquired fast-growing HR platform provider Dayforce in 2012. It now offers a full suite of services including payroll, benefits, workforce management and recruiting to over 3,000 customers. Its Dayforce segment has been growing at 45%+ at scale, taking share in the nearly $20 billion HCM payroll and applications market, which is growing at 9%. However, Ceridian’s legacy businesses create a drag on overall growth and the company will be highly leveraged at 5.0x 2017 net debt/adjusted EBITDA post-IPO. Ceridian is dual listing on the NYSE and TSX.
Work collaboration platform Smartsheet (SMAR) is targeting $128 million at a $1.2 billion market value. Smartsheet is addressing a multi-billion dollar opportunity and has grown revenue at 60%+ in each of the past two years. Dollar-based net retention was 130% in the FY17 and has been expanding. However, that growth has come at a high cost: S&M spend soared in FY18, widening its already steep net loss.
nLight (LASR), which manufactures high-power lasers made with semiconductor chips and optical fiber, aims to raise $76 million at a $533 million market value. The company recently expanded gross margin to 37% in 2017, and the market is expected to grow at 12% to $4 billion in 2020. However, nLight faces high customer concentration (top two were 24% of 2017 sales) and has low revenue visibility and high fixed costs.
Personal lines insurance brokerage Goosehead Insurance (GSHD) it targeting $128 million at a $525 million market cap. Goosehead believes its business model, which separates sales from service and offers policies from over 80 carriers, provides a better insurance solution for consumers. Its anticipated franchise expansion should help the company grow geographically. However, risks include highly concentrated revenue (six carriers accounted for 61% of commissions in 2017) and its reliance on the fees charged by insurance carriers.
Taiwan Liposome Company (TLC) aims to raise $35 million at a $246 million market value. This clinical stage specialty pharma is using its proprietary technology to develop lipid formulations of approved drugs for pain and eye disease. Taiwan Liposome expects to have its four lead candidates in pivotal clinical trials in 2019. The company is listed on the Taipei Exchange under 4152.
Alzheimer's biotech Alzheon (ALZH) and UK-based rare disease biotech Mereo BioPharma Group (MREO) are both day-to-day.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 3.2% year-to-date, while the S&P 500 is down -0.1%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and Snap (SNAP). The Renaissance International IPO Index is up 3.1% year-to-date, while the ACWX is up 0.6%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and Samsung BioLogics.
