US IPO Week Ahead: The IPO market braces for a September SNOWstorm in a 14 IPO week

Updated Monday, 9/14.

The post-Labor Day IPO frenzy is here as 14 IPOs plan to raise $7.8 billion in the coming week, led by cloud data unicorn Snowflake (SNOW). It is expected to be the biggest week for the IPO market by proceeds since May 2019, when Uber went public, and the most deals in a week since 2014.

The largest deal of the week, Snowflake (SNOW) plans to raise $2.2 billion at a $28.2 billion market cap. The company plans to raise over $800 million from Berkshire Hathaway and Salesforce.com in a concurrent private placement. Snowflake provides a cloud-based data warehousing platform that is available on the three major public clouds. While it will likely remain unprofitable in the near term, the company is growing fast (+174% y/y) and should benefit from the ongoing shift to cloud.

Unity Software (U) plans to raise $950 million at an $11.7 billion market cap. The company is a leading software platform for creating and monetizing video games, responsible for over 50% of the top 1,000 games in Apple’s app store and Google Play. Targeting a large addressable market, Unity is fast-growing with solid gross margins, but high R&D spend has led to substantial losses.

Rank Group spinoff Pactiv Evergreen (PTVE) plans to raise $800 million at a $3.4 billion market cap. Pactiv is the largest North American maker of packaging for the foodservice, food merchandising, and beverage industries, with a #1, #2, or #3 market share in 80% of its products. The company plans to use IPO proceeds to pay down debt, though it will still be highly leveraged post-IPO.

Telehealth provider American Well (AMWL) plans to raise $525 million at a $3.6 billion market cap. The company allows customers to augment existing health plans and providers with subscription-based tools and other services. While it is highly unprofitable with a large accumulated deficit, the company has benefited from the accelerated adoption of telehealth services during the pandemic.

JFrog (FROG), which sells software tools that streamline app development, plans to raise $405 million at a $3.6 billion market cap. With strong revenue growth and positive cash flow, the company has attracted a sticky customer base of over 5,800 customers. However, ARR growth and retention have been impacted by COVID, and insiders are selling on the IPO.

Sumo Logic (SUMO) plans to raise $281 million at a $2.3 billion market cap. The company provides a SaaS monitoring and analytics platform to its more than 2,000 enterprise customers. Fast-growing and unprofitable, the company has demonstrated consistently high dollar-based net retention, though it has experienced a pandemic-driven increase in customer churn. Existing shareholder Tiger Global plans to buy 10% of the IPO.

Commercial REIT Broadstone Net Lease (BNL) plans to raise $603 million at a $2.8 billion market cap. The REIT’s portfolio consists of 633 properties across the US and Canada, and tenants include large names such as Red Lobster and Siemens. However, only 16% of its annualized base rent came from investment grade tenants as of 6/30/20. Broadstone plans to offer a 5.6% yield at the midpoint.

StepStone Group (STEP) plans to raise $280 million at a $1.6 billion market cap. The global private markets investment firm provides customized investment solutions and advisory and data services to clients. The company oversaw $292 billion of private markets allocations as of 6/30/20, though its operations were hit hard by the pandemic.

Brazilian digital education provider Vitru (VTRU) plans to raise $258 million at a $541 million market cap. The company is a leading postsecondary digital education provider in Brazil, offering distance learning products as well as in-person tutoring services. The company’s margins expanded in the 1H20, though revenue growth decelerated.

Outset Medical (OM) plans to raise $175 million at a $1.0 billion market cap. The company provides a hemodialysis system for acute care and home settings, designed to be lower-cost and easier to use than competitors. It is still commercializing in the home market, for which its device was approved in March 2020. Highly unprofitable, the company has generated negative gross margins to date.

Rare disease biotech Dyne Therapeutics (DYN) plans to raise $175 million at a $782 million market cap. The early-stage company is developing oligonucleotide therapies for rare muscular diseases, and it plans to submit INDs for its three lead programs between the 4Q21 and the 4Q22.

NASH biotech Metacrine (MTCR) plans to raise $85 million at a $364 million market cap. The company is developing differentiated therapies for liver and GI diseases, and it is currently in a Phase 1 trial for its FXR agonist therapies for NASH. While there are no approved therapies for NASH, several competitors are in later stage trials.

Neurodegeneration biotech Athira Pharma (ATHA) plans to raise $160 million at a $480 million market cap. The company's lead candidate, ATH-1017, demonstrated improvements in brain network activity indicating potentially positive effects on brain function in nonclinical studies and Phase 1 clinical trials. The company plans to initiate a Phase 2/3 clinical trial for ATH-1017 by the end of 2020.

Psilocybin biotech COMPASS Pathways (CMPS) plans to raise $101 million at a $569 million market cap. The company is using its proprietary formulation of psilocybin, COMP360, in conjunction with psychological support as a way to help individuals who have treatment-resistant depression. The candidate is currently in a Phase 2b trial, with data expected in late 2021.

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Street research is expected for four companies in the week ahead. On Monday, 9/14: Harmony Biosciences (HRMY) and Inhibrx (INBX). On Tuesday, 9/15: Kymera Therapeutics (KYMR) and Nano-X Imaging (NNOX).

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 9/10/20, the Renaissance IPO Index was up 53.4% year-to-date, while the S&P 500 was up 3.4%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Zoom Video (ZM) and Uber (UBER). The Renaissance International IPO Index was up 34.6% year-to-date, while the ACWX was down 5.0%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Xiaomi and Meituan-Dianping.