US IPO Week Ahead: IPO market ramps up with 8 deals despite investor caution

Up to eight companies are set to raise $831 million in the week ahead. Florida insurance brokerage BRP Group (BRP) is the largest by deal size, while employee benefits provider Progyny (PGNY) and Chinese education company Youdao (DAO) target billion-dollar valuations. Additionally, post-IPO Street research for Peloton (PTON) will hit on Monday.

Recent aftermarket returns are still poor, with IPOs over the past 90 days averaging -11.4% after day one. As a result, IPOs broadly face pricing pressure, with eight of the past nine deals pricing below the midpoint.

BRP Group (BRP) plans to raise $246 million at a $973 million market cap. The insurance brokerage focuses on four operating groups: Middle Market (46% of 1H19 revenue), MainStreet (33%), Medicare (10%), and Specialty (25%). After more than 25 acquisitions, BRP Group now represents over 400,000 clients globally and showed strong revenue growth in 2018 of 66% (18% organic), though organic growth pulled back in the 1H19. 

Fertility benefits manager Progyny (PGNY) plans to raise $150 million at a $1.5 billion market cap. Backed by TPG and Kleiner Perkins, Progyny has over 80 clients, providing coverage to roughly 1.4 million members. The newly-profitable company more than doubled revenue in 2018 to $105 million (18% gross margin), and is on pace to do the same in 2019. 

Youdao (DUO), a Chinese online education platform being spun out of NetEase (Nasdaq: NTES), plans to raise $92 million at a $2.0 billion market cap. In the six months ended June 30, 2019, the company served over 100 million average total MAUs, and revenue growth accelerated to 68% to reach $77 million. However, gross margin declined to 29% and EBITDA margin declined to -28%.

Phase 3 biotech Phathom Pharmaceuticals (PHAT) plans to raise $150 million to command a $650 million market cap. Formed by Takeda and Frazier, its pipeline contains lead candidate vonoprazan, an oral small molecule therapy being developed for GERD and H. pylori infection, both common GI diseases. backed by 5AM Ventures and Adage Capital, Cabaletta Bio (CABA) is developing therapies for autoimmune diseases using engineered CAAR T cells.

OneWater Marine (ONEW), a recreational boat retailer that operates 63 stores in the US, plans to raise $60 million to command a $181 million market cap. Backed by Goldman, OneWater Marine has made 17 acquisitions since its 2014 formation. For the nine months ended June 30, 2019, revenue grew 26% (9% organic) to $562 million (6% EBITDA margin).

Chinese aesthetic procedure provider Aesthetic Medical International Holdings (AIH) plans to raise $30 million at a $283 million market cap. Holdover Hylete (HYLT), which sells fitness apparel direct to consumer online, plans to raise $15 million at a market cap of about $70 million.

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The following IPOs are expected to price this week:

Aesthetic Medical International Holdings (AIH), which operates aesthetic medical services centers in China, plans to raise $30 million by offering 2.5 million shares at a price range of $11.00 to $13.00. At the midpoint of the proposed range, Aesthetic Medical International would command a market value of $283 million. Aesthetic Medical International Holdings, which was founded in 1997, booked $798 million in sales over the last 12 months. The Shenzhen, China-based company plans to list on the Nasdaq under the symbol AIH. Cantor is the lead bookrunner on the deal.

BRP Group (BRP), a fast-growing insurance brokerage based in Florida, plans to raise $246 million by offering 16.4 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, BRP Group would command a market value of $973 million. BRP Group, which was founded in 2011, booked $102 million in sales over the last 12 months. The Tampa, FL-based company plans to list on the Nasdaq under the symbol BRP. J.P. Morgan is the lead bookrunner on the deal.

Cabaletta Bio (CABA), a Phase 1-ready biotech developing engineered T cells for autoimmune diseases, plans to raise $87 million by offering 5.8 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, Cabaletta would command a market value of $358 million.  Founded in 2017, the Philadelphia, PA-based company plans to list on the Nasdaq under the symbol CABA. Morgan Stanley is the lead bookrunner on the deal.

Hylete (HYLT), which designs and sells fitness apparel online, plans to raise $15 million by offering 1.7 million shares at a price range of $8.00 to $10.00. At the midpoint of the proposed range, it would command a market value of $71 million. Hylete, which was founded in 2012, booked $12 million in sales over the last 12 months. The Solana Beach, CA-based company plans to list on the NYSE American under the symbol HYLT. Maxim is the lead bookrunner on the deal.

OneWater Marine (ONEW), a recreational marine retail platform that owns and operates 63 stores in the US, plans to raise $60 million by offering 3.2 million shares at a price range of $18.00 to $20.00. At the midpoint of the proposed range, it would command a market value of $181 million. OneWater Marine, which was founded in 2014, booked $719 million in sales over the last 12 months. The Buford, GA-based company plans to list on the Nasdaq under the symbol ONEW. Goldman is the lead bookrunner on the deal. Existing shareholders intend to purchase up to $9.7 million of the IPO (16% of the deal).

Phathom Pharmaceuticals (PHAT), a phase 3 biotech developing an in-licensed treatment for common gastrointestinal diseases, plans to raise $150 million by offering 7.9 million shares at a price range of $18.00 to $20.00. At the midpoint of the proposed range, Phathom would command a market value of $650 million. Phathom Pharmaceuticals was founded in 2018. The Buffalo Grove, IL-based company plans to list on the Nasdaq under the symbol PHAT. Goldman is the lead bookrunner on the deal.

Progyny (PGNY), which manages employee fertility benefits programs, plans to raise $150 million by offering 10.0 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, it would command a market value of $1.5 billion. Progyny, which was founded in 2016, booked $160 million in sales over the last 12 months. The New York, NY-based company plans to list on the Nasdaq under the symbol PGNY. J.P. Morgan is the lead bookrunner on the deal.

Youdao (DAO), a Chinese online education platform being spun out of NetEase, plans to raise $92 million by offering 5.6 million shares at a price range of $15.00 to $18.00. At the midpoint of the proposed range, it would command a market value of $2.0 billion. Youdao, which was founded in 2006, booked $953 million in sales over the last 12 months. The Hangzhou, China-based company plans to list on the NYSE under the symbol DAO. Citi is the lead bookrunner on the deal. The CEO of Netease intends to purchase $20 million of the IPO (22% of the deal), and Orbis has agreed to invest $125 million in a concurrent private placement.

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 10/17/19, the Renaissance IPO Index was up 23.7% year-to-date, while the S&P 500 had a gain of 21.5%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and Roku (ROKU). The Renaissance International IPO Index was up 18.8% year-to-date, while the ACWX was up 14.2%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Meituan-Dianping and SoftBank.