Four IPOs raised $315 million during the last week of the month, bringing July’s deal count to ten and signaling that IPO activity has not yet taken a vacation. Further evidence of a gradual tech IPO recovery materialized with cloud-based software provider Talend rocketing 42% higher on its debut, after pricing 13% above the midpoint. On the other hand, cash-burning drug maker Kadmon saw shares fall 19% on its opening day after pricing 33% below the midpoint, continuing the trend of underperforming biotech IPOs.
Talend (TLND), which offers a next-generation data integration platform to enterprises, raised $94.5 million after pricing at $18, above the $15-$17 range. Though currently unprofitable, the company addresses a $16 billion market and has managed to secure big-name customers such as General Electric, Allianz and Citi. Talend projects steep revenue growth. Fellow technology companies Twilio (TLWO; +181% total return) and LINE (LN; +14%) are the only other companies to price above the range this year.
Kinsale (KNSL), a specialty insurer led by former James River (JRVR; 12/14 IPO; +63%) executives, climbed 15% on its debut. After upsizing the offering and pricing at the top of its range, the pure-play excess and surplus insurer raised $106 million (24% insider selling). The company has maintained an industry-leading adjusted combined ratio as well as an ROE above 15% during the same period. That said, while gross premiums written have increased, competition has put downward pressure on its average premiums.
Kadmon (KDMN), a biotech with an accumulated deficit of $677 million, was the year’s second-worst performing debut, trading down 19%, despite pricing 33% below its original midpoint. It closed even lower on Friday, for a -25% total return thus far. Its unusual capital structure may have turned off investors. Though it raised $75 million (53% insider buying) on the offering, it will need substantial additional capital in order to see its Phase 2 candidates through to commercialization.
Tactile Systems (TCMD), which sells at-home compression devices for vascular swelling, raised $40 million by offering 4 million shares at $10, after it hovered in day-to-day status for almost a month and slashed its price from the original $14-$16 range. Its heavy reliance on one product (>85% of sales), potential issues with Medicare reimbursement and uncertain scalability of its business model may have led to the valuation haircut needed to attract investors. While it finished the week up 13% at $11.26, it is still well below the initial range.
| IPO Pricings Week of July 25th, 2016 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap ($mm) |
Price vs. midpoint |
First-day return |
Return at 7/29 |
| Talend (TLND) |
$95 | $541 | +13% | +42% | +42% |
| Provides an open source data integration platform to enterprise customers. |
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| Kinsale Capital Group (KNSL) | $106 | $336 | +7% | +15% | +14% |
| Property and casualty insurer providing excess and surplus insurance. |
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| Tactile Systems Technology (TCMD) | $40 | $184 | -33% | +11% | +13% |
| Sells at-home compression therapy devices for vascular swelling. |
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| Kadmon (KDMN) | $75 | $538 | -33% | -19% | -25% |
| Developing kinase inhibitors for autoimmune disease, fibrosis and solid tumors. |
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IPO Pipeline update
Five companies set terms this week, including BNP spin-off First Hawaiian (FHB; $464 million deal size) and big-box home furnishings retailer At Home Group (HOME; $130 million), both slated to price in the coming week. They were joined by three smaller deals: late-stage biotech Motif Bio (MTFB; $35 million), gastrointestinal biotech AzurRX (AZRX; $15 million) and Wi-Fi antenna provider Airgain (AIRG; $14 million), all expected in August. The only initial filing came from Microphase (MCRO.RC; $12 million), a micro-cap manufacturer of microwave electronic components.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. After five weeks of ourperformance, the US IPO Index tied the S&P 500 this week as both indices fell 0.1%. Year-to-date, the IPO Index is down 3%, while the S&P 500 up 6%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Synchrony Financial (SYF) and Citizens Financial Group (CFG). The Renaissance International IPO Index rose 3% this week for a YTD return of -4%, compared to the ACWX, which increased 1% this week for a YTD return of +2%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Recruit Holdings, NN Group and Aena S.A.
