The markets sold off, but IPOs continued to get done, with four deals raising $1.5 billion. High-growth Brazilian payments company StoneCo (STNE) even priced its $1.1 billion offering above the range, and then flew up 30%. Cooler company YETI Holdings (YETI) had a chilly reception, and two small pre-bought deals, a Chinese fintech and a biotech, notched small gains.
The October IPO market has been active despite the market meltdown, but signs point to a slower November. Fewer new filings have come in, the IPO Index has shed about -16% since the start of the month, and the VIX Volatility Index finished the week near 25. Stone's pop means that some growth IPOs could get interest, like Qualtrics (XM) or Revolve (RVLV), but for the most part, companies looking to IPO have three options:
1) Price at a significant discount to peers
2) Raise most of the IPO funds from insiders
3) Wait
| 5 IPOs During the Week of October 22nd, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 10/26 |
| StoneCo (STNE) | $1,145M | $6,807M | 9% | +31% | +30% |
| Brazilian payment processor focused on small and medium-sized businesses. | |||||
| Gamida Cell (GMDA) | $50M | $210M | -43% | +6% | +6% |
| Phase 3 biotech developing stem cell therapies for hematologic malignancies. | |||||
| Alberton Acquisition (ALACU) | $100M | $128M | 0% | n/a | +0% |
| Hong Kong-based blank check company led by Ben Wang of Eon Capital. | |||||
| Pintec Technology (PT) | $44M | $520M | 8% | +5% | +0% |
| Operates an online platform that facilitates merchant financing in China. | |||||
| YETI Holdings (YETI) | $288M | $1,574M | -10% | -6% | -9% |
| Designs and sells premium branded outdoor equipment. | |||||
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Staring down the sell-off, StoneCo priced above the range and popped 31%. Net investor Berkshire Hathaway lent credibility to the valuation by indicating on over $300 million of the IPO. All told, Berkshire and insiders took down over half of the deal, while Chinese payments behemoth Ant Financial invested $100 million in a concurrent private placement. While potential regulations pose a threat, Stone offered investors a straightforward story: rapid growth and high profitability in an industry with strong secular trends.
Investors were bearish on grizzly-proof cooler maker YETI, which came back this week after delaying an IPO in 2016 and withdrawing earlier this year. The company raised $288 million by pricing a downsized offering below the range, with 84% of proceeds going to insiders. The stock fell 9%. While its strong brand commands pricing, the growth that YETI had in the 1H18 sharply declined in the preliminary 3Q, while gross margins have been hit by rising competition and discounted merchandise.
Chinese loan facilitation platform Pintec Technology (PT) raised $44 million by pricing near the high end at $11.88. Less than 175,000 ADSs traded on Thursday, just 5% of the offer size. After breaking issue, the stock finished its first day with a gain of 5% thanks to an end-of-day order of just 1,200 ADSs. The unusual pricing and volume is due to the fact that 3.9 million ADSs went to insiders and others - 105% of the pre-greenshoe offer size.
Even with most of the deal covered by insiders, stem cell biotech Gamida Cell (GMDA) took a large valuation cut, pricing an upsized offering at $8, well below the $13-$15 range. Backed by Novartis, insiders took down 75% of the deal. It finished the week with a slight gain.
Continuing the year's record SPAC activity, Hong Kong-based Alberton Acquisition (ALACU) raised $100 million. Alzheimer's biotech Alzheon (ALZH) had been scheduled for this past week, but is now tentatively targeting next week.
| 5 Filings During the Week of October 22nd, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| 360 Finance (QFIN) | $200M | Financials | Goldman (Asia) |
| Chinese online consumer lending platform and finance partner of Qihoo's 360 Group. | |||
| Boxwood Merger (BWMCU) | $250M | SPAC | BofA ML |
| Black check company formed by Macquarie to acquire a technical services firm. | |||
| AMCI Acquisition (AMCIU) | $200M | SPAC | Jefferies |
| Blank check company formed by coal industry veteran Hans Mende. | |||
| FinTech Acquisition III (FTACU) | $275M | SPAC | Cantor Fitz. |
| Blank check company formed by management of The Bancorp to acquire a financial technology business. | |||
| MMTEC (MMTC) | $8M | Financials | WestPark Capital |
| Operates a China-based online securities trading platform. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 10/25/18, the Renaissance IPO Index was down 7.2% year-to-date, while the S&P 500 had a gain of 2.3%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and Athene (ATH). The Renaissance International IPO Index was down 18.1% year-to-date, while the ACWX was down 11.1%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Siemens Healthineers and innogy.
