The IPO market will kick off June with four initial public offerings set to raise $550 million. The four on the calendar are each in different industries, including tech, consumer, energy and health care. This marks the third week without a biotech IPO - the longest stretch since the beginning of the year.
May was a big month for IPOs, and June could be the same based on the level of IPOs last year and the recent uptick in filings.
Evolent: Health care evolves
Evolent Health (EVH) provides hospitals with software that facilitates the shift from a fee-for-service model to value-based care. Backed by TPG, UPMC and The Advisory Board (NASDAQ: ABCO), the high-growth health-tech IPO targets a $10 billion market. Revenue grew 85% to $37 million in the 1Q15 as it secured 5+ year contracts with major health care providers. However, Evolent will remain unprofitable in the near term and five clients make up over 75% of sales. The year's other health-tech IPO, Inovalon (INOV), priced above the range and ended its first day with a 0% return; it is now 2% below the offer price.
Stop reading the Renaissance IPO blog? Not for all the tea in Canada!
It's tea time for DAVIDsTEA (DTEA), which sells loose-leaf teas, accessories and beverages from its 161 stores in Canada and the US. The company benefits from favorable tea consumption trends, and the year's three consumer IPOs (SHAK, PRTY, BOJA) have all outperformed. Sales increased over 30% to $115 million this past year. The proposed valuation does not appear steep, either, compared to peers. But as it expands in the US, DAVIDsTEA faces increased competition from Starbucks, which bought close competitor and 2011 IPO Teavana in 2012. In addition, its comp store sales growth (+11% in 2014, +6% in the 1Q15) has largely relied on price increases rather than store traffic. Insiders, including David himself, are selling 40% of the deal.
Formed by Natural Gas Partners, PennTex Midstream Partners LP (PTXP) owns natural gas gathering and processing assets in Northern Louisiana. The MLP's sole customer will be NGP-backed Memorial Resource Development (NASDAQ: MRD), an oil and gas E&P that IPO'd in June 2014. PennTex operates under a 15-year contract with Memorial Resource and targets an initial yield of 5.5% for its unproven assets.
Patients going through with a colonoscopy do not want the doctor to miss anything. EndoChoice (GI) offers an endoscopy system that uses multiple cameras to provide physicians with a 330° field-of-view, compared to the standard 170° view. Launched in late 2013, the system represented 25% of its $17 million in 1Q15 sales. It also sells single-use supplies to one third of US GI departments and hopes to use those relationships to sell its equipment as it takes on well-established heavyweights Olympus, Fujifilm and Pentax.
| Renaissance Capital's IPO Calendar - Week of 6/1/2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 Bookrunners |
| PennTex Midstream Partners LP Houston, TX |
PTXP NASDAQ |
$225 | $19 - $21 11,250,000 |
Citi Barclays |
| NGP-backed MLP with midstream assets contracted to Memorial Resource. | ||||
| Evolent Health Arlington, VA |
EVH NYSE |
$150 | $14 - $16 10,000,000 |
J.P. Morgan Goldman Sachs |
| Offers health care providers a software platform for managing value-based care. | ||||
| EndoChoice Holdings Alpharetta, GA |
GI NYSE |
$100 | $15 - $17 6,250,000 |
J.P. Morgan BofA Merrill Lynch |
| Sells gastrointestinal endoscopy systems with wide field-of-view cameras. | ||||
| DAVIDsTEA Quebec, Canada |
DTEA NASDAQ |
$77 | $14 - $16 5,100,000 |
Goldman Sachs J.P. Morgan |
| Canadian retailer of proprietary teas and accessories with 161 stores. | ||||
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IPO pipeline update: Three new filings
May was the most active month for initial filings with 27 new companies added to the IPO pipeline, though last week saw just three. Biotech activity has fallen in the past few weeks but new filer Seres Therapeutics (MCRB) could receive investor interest as the first microbiome biotech. The latest in health-tech, KPCB-backed on-demand physician network Teladoc (TDOC) filed to raise $100 million. Brazilian steakhouse Fogo de Chao (FOGO), large chemicals distributor Univar (UNVR) and major credit bureau Transunion (TRU) all updated financials ahead of potential June IPOs.
IPO market snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has traded up 8% year-to-date, compared to 3% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Hilton Worldwide (HLT) and Twitter (TWTR). The Renaissance International IPO Index has traded up over 12% year-to-date, compared to less than 8% for the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Altice and Deutsche Annington. To find out if these are the best ETF for you, visit our IPO Investing page.
