There were no initial public offerings in the past week, but recent IPO performance continues to trend up. The 24 IPOs in 2015 now average +18%, including +5% after the first day, its highest point this year.
A few highlights from February 2015:
• 10 IPOs priced in February, down from 20 in 2014
• These returned 7.5% on average; none have gained over 21%
• 6 IPOs postponed in February, up from 1 last year
• Year's two largest US IPOs: Inovalon ($600mm) and Columbia Pipeline LP ($1.1 billion)
Health care: popular sector has pushback
Five health care companies went public in February and five more postponed their IPOs. Of the five, only genetic test provider Invitae (NVTA) has gained more than 2%. Two companies (CHEKU, ITEK) received a greater valuation cut that 95% of 2014 IPOs and proceeded to trade flat. Bellerophon (BLPH) had the worst first-day performance for a biotech (-25%) in over 10 years and Nexvet (NVET) didn't do much better (-11%), but both have since climbed up to the IPO price. Don't expect the poor performance of these IPOs to dry up the pipeline; new health care companies continue to submit initial filings.
Three yield deals: Pipelines outperform
With energy stocks in the tank, REITs could replace MLPs as the 2015 IPO dividend play. We could also see a shift from MLPs with oil and gas collection assets to those with storage and long-distance transportation assets (CPPL, PESL, PESC) or GPs with their distribution rights (EQGP, TEGP).
Columbia Pipeline Partners LP (LP) was the best-performing February IPO, up 20% from its offer price, and the year's first to raise over $1 billion. Transportation assets are still necessary even with depressed oil and gas prices. Government property REIT Easterly (DEA) saw a moderate gain while sub-performing mortgage REIT Great Ajax (AJX) has had sub-par performance, down 1%.
A tech stock with aftermarket performance?
Inovalon (INOV), February's only tech IPO, priced above the range and ended its first day flat. It has since traded up 15%, providing retail investors with the chance to capture all of its gains.
| February 2015 IPOs | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-Day Pop | Return as of 2/27 |
| Columbia Pipeline Partners LP (CPPL) |
Gas pipelines and storage | $1,077 | 15% | 17% | 20% |
| Invitae (NVTA) |
Suite of genetic tests | $102 | 14% | 7% | 17% |
| Inovalon (INOV) | Health care data platform | $600 | 20% | 0% | 15% |
| Avenue Financial Holdings (AVNU) | Nashville bank | $28 | -8% | 8% | 14% |
| Easterly Government Properties (DEA) | REIT with government-leased offices | $180 | 0% | 3% | 7% |
| Check-Cap (CHEKU) |
Ingestible cancer detection |
$12 | -45% | 0% | 1% |
| Inotek (ITEK) | Biotech: glaucoma | $40 | -57% | 0% | 0% |
| Nexvet Biopharma (NVET) | Biotech: cat and dog pain | $40 | -31% | -11% | 0% |
| Bellerophon Therapeutics (BLPH) |
Biotech: pulmonary/cardiac disease | $60 | -21% | -25% | 0% |
| Great Ajax (AJX) | Mortgage REIT | $71 | -11% | -2% | -1% |
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IPO market snapshot
The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, has traded up nearly 6% year-to-date, close to its all-time high. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (TWTR), Zoetis (ZTS), Alibaba (BABA), Hilton (HLT) and Ally Financial (ALLY). To find more about purchasing shares of the ETF from your broker, visit our new IPO investing page.
