US IPO Week Ahead: A 6-IPO week led by cannabis and the cloud

Six IPOs are set to raise $723 million in the week ahead, along with one SPAC.

Cloud-based software development platform Dynatrace (DT) is by far the largest, expected to raise over half of the week's proceeds at a $3.8 billion valuation. It's joined by a large early-stage cannabis producer (SNDL), a Chinese AR play (WIMI), a cancer biotech (RAPT), a US sushi chain (KRUS), and a micro-cap battery producer (FLUX).

Bought by Thoma Bravo for $2.5 billion in 2014, Dynatrace is raising $427 million at the $12 midpoint. While it will still carry substantial debt post-IPO, Dynatrace is profitable on an adjusted basis, and has so far successfully transitioned from selling on-prem software licenses to its new cloud-based SaaS (84% of MRQ sales).

Canadian cannabis producer Sundial Growers (SNDL) plans to list on the Nasdaq with a $1.6 billion market cap. With only $1 million in historical trailing sales, it expects to quickly ramp up in 2019 with its first harvest, while a recent acquisition gives it a foothold in the UK. Last year's cannabis IPO Tilray (TLRY) has traded down 40% in 2019, though it is still more than 140% above its offer price, at a valuation of over 100x LTM sales.

WiMi Hologram Cloud (WIMI) is targeting $34 million at a market cap of nearly $500 million. A leading player in China's holographic augmented reality space, the founder-owned company saw its sales jump 58% in the MRQ to $11 million, with a strong net margin of 48%.

Backed by The Column Group and Kleiner Perkins, RAPT Therapeutics (RAPT) is developing a therapies for difficult-to-treat cancers and inflammatory diseases.

Kura Sushi USA (KRUS), being spun out of its Japanese parent (TSE: 2695), is targeting a market cap $123 million; the small chain (22 stores) believes that it can expand its footprint by 13x in the US, and aims to be the first US-based restaurant to IPO in four years.

Micro-cap battery maker Flux Power (FLUX) more than doubled its revenue to $6 million in the past 9 months, though it is highly unprofitable (-127% EBITDA margin).

Blank check company Netfin Acquisition (NFINU) is raising $220 million for a fintech business. It is led by Rick Maurer, founder and CEO of Longview Resources Group, and Martin Jaskel, a UK banker and director at European American Capital.

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The following IPOs are expected to price this week:

Dynatrace Holdings (DT), which provides a software intelligence platform for the enterprise cloud, plans to raise $427 million by offering 35.6 million shares at a price range of $11.00 to $13.00. At the midpoint of the proposed range, Dynatrace Holdings would command a market value of $3.8 billion. Dynatrace, which was founded in 2005, booked $431 million in sales over the last 12 months. The Waltham, MA-based company plans to list on the NYSE under the symbol DT. Goldman Sachs, J.P. Morgan, and Citi are the lead joint bookrunners on the deal. Dragoneer Investment Group intends to purchase up to $75 million of the IPO (18% of the deal).

Flux Power Holdings (FLUX), which manufactures and sells lithium-ion batteries and storage solutions, plans to raise $13 million by offering 1.4 million shares at a price of $9.00. At that price, it would command a market value of $59 million. Flux Power, which was founded in 1998, booked $7 million in sales over the last 12 months. The Vista, CA-based company plans to list on the Nasdaq under the symbol FLUX. Roth Capital and Maxim Group LLC are the joint bookrunners on the deal.

Kura Sushi USA (KRUS), which operates 22 Japanese restaurants in the US featuring revolving sushi bars, plans to raise $44 million by offering 2.9 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, Kura Sushi USA would command a market value of $123 million. Kura Sushi USA, which was founded in 2008, booked $60 million in sales over the last 12 months. The Irvine, CA-based company plans to list on the Nasdaq under the symbol KRUS. BMO Capital Markets and Stephens Inc. are the joint bookrunners on the deal.

RAPT Therapeutics (RAPT), a Phase 1 biotech developing therapies for cancer and inflammatory diseases, plans to raise $75 million by offering 5.0 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, RAPT Therapeutics would command a market value of $351 million. Founded in 2015, the South San Francisco, CA-based company plans to list on the Nasdaq under the symbol RAPT. BofA Merrill Lynch, Wells Fargo Securities, BMO Capital Markets and UBS Investment Bank are the joint bookrunners on the deal. Insiders intend to purchase up to $25 million of the IPO (33% of deal).

Sundial Growers (SNDL), an early-stage Canadian cannabis producer, plans to raise $130 million by offering 10.0 million shares at a price range of $12.00 to $14.00. At the midpoint of the proposed range, Sundial Growers would command a market value of $1.6 billion. Sundial Growers, which was founded in 2006, booked $1 million in historical sales over the last 12 months. The Calgary, Canada-based company plans to list on the Nasdaq under the symbol SNDL. Cowen, BMO Capital Markets, RBC Capital Markets, Barclays and CIBC are the joint bookrunners on the deal.

WiMi Hologram Cloud (WIMI), a Chinese provider of ad services and software used in holographic augmented reality, plans to raise $34 million by offering 4.0 million shares at a price range of $7.50 to $9.50. At the midpoint of the proposed range, WiMi Hologram Cloud would command a market value of $496 million. WiMi Hologram Cloud, which was founded in 2015, booked $37 million in sales over the last 12 months. The Beijing, China-based company plans to list on the Nasdaq under the symbol WIMI.  Benchmark Company, Maxim Group LLC, China Merchants Securities, AMTD Global Markets and BOCI are the joint lead bookrunners on the deal.

Netfin Acquisition Corp (NFINU), a blank check company targeting a fintech business in an emerging market, plans to raise $220 million by offering 22.0 million units at a price of $10.00. At that price, Netfin Acquisition would command a market value of $281 million. Founded in 2019, the New York, NY-based company plans to list on the Nasdaq under the symbol NFINU. B. Riley FBR is the lead bookrunner on the deal.

Renaissance Capital will have Pre-IPO Research available on each of these upcoming IPOs prior to its pricing.

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 7/25/19, the Renaissance IPO Index was up 41.7% year-to-date, while the S&P 500 had a gain of 21.2%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and Elanco (ELAN). The Renaissance International IPO Index was up 13.0% year-to-date, while the ACWX was up 14.0%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Meituan-Dianping and SoftBank.