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US IPO Pricing Recap: Arista kicks off a heating IPO market in June
Analyst IPO Blog
Arista Networks (
) and Radius Health (
) began trading on Friday as the first two initial public offerings of an increasingly packed June IPO calendar. While
May was not a slow month for IPOs
, initial valuations and subsequent performance had a chilling effect as eligible initial filers sat on the sidelines waiting for a more receptive IPO market. Now that market may have arrived. Recent tech performance, including Arista's premium pricing and 28% first-day pop, continues to build momentum for future IPOs, particularly in the enterprise software space. After hitting a low for the year in mid-May, the Renaissance IPO ETF has jumped +7%, compared to 3% for the S&P 500. Driven by tech, the 13 IPOs in the past 30 days have traded up 29% on average, including +15% aftermarket return available to retail investors. With the market picking up, 12 companies set terms for upcoming IPOs in the past week,
Owned and operated by former Cisco management, Arista Networks challenges market incumbent Cisco (>70% share) in selling its software-packaged data center switches to customers like Facebook (FB), Microsoft (MSFT), Netflix (NFLX) and Morgan Stanley (MS). Tech IPOs in the pipeline like Box (
), TubeMogul (
) and Imprivata (
) are no doubt encouraged by the breakout performance of the eight tech IPOs since May. Each has traded up following its IPO and the group together averages a +48% return, with the worst performer up 28%. Five are Chinese, and the group's strong returns bode well for the highly-anticipated Alibaba IPO (
), now rumored by the media to be coming on August 8th.
Technology IPOs outperform since May 1, 2014
Deal Size ($mm)
Price vs. Midpoint
Return as of 06/06
Arista Networks (
SunEdison Semiconductor (
Jumei International (
Cheetah Mobile (
Tech IPOs (8)
05/01 - 06/06
Non-tech IPOs (15)
05/01 - 06/06
Source: IPO investment advisory firm Renaissance Capital
Radius Health filed for an IPO in 2012 but withdrew later that year, filed again this past February but postponed in May, and last week went public after slashing its price by 47%. The company, whose treatment (in Phase 3 trials) restores bone density in osteoporosis patients, joins a high number of biotechs this year that have been forced to significantly drop their IPO price. The ten most heavily discounted biotechs of the year now average 3% in the aftermarket as Alder Biopharmaceuticals (
) and Vital Therapies (
) traded up 46% and 47%, respectively, last week. The 23 other biotechs in 2014 have averaged 26% in first-day trading, but have since fallen 7%, suggesting that ordinary investors may have better odds with these "bargain" biotech IPOs.
10 most heavily discounted biotech IPOs of 2014
IPO Price vs. Midpoint
Return as of 6/6
Radius Health (
Agile Therapeutics (
Alder BioPharmaceuticals (
Vital Therapies (
Argos Therapeutics (
Eleven Biotherapeutics (
Celladon Corporation (
Group Average (10)
01/01 - 06/06
Other Biotechs (23)
01/01 - 06/06
Withdrew IPO and refiled
IPO market snapshot
So far this year, 117 IPOs have raised $23.7 billion and produced an average first day return of 14%. The Renaissance IPO ETF (symbol:
), a cap-weighted basket of newly public companies and indicator of post-IPO performance, has climbed to its beginning-of-year price compared to +6% for the S&P 500. Over the last 30 days, the IPO ETF has risen 6% compared with 4% for the S&P 500, suggesting that the IPO market has become more receptive to new issuance. The active IPO pipeline includes 126 companies looking to raise a total of $48.4 billion, led by the health care (35 IPOs, $3 billion) and technology (18 IPOs, $24 billion) industries.
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Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Investors should consider the investment objectives, risks, charges and expenses carefully before investing.
As stated in the Prospectus, the total annual operating expenses for the Fund was 3.48%. The Adviser has contractually agreed to keep net expenses from exceeding 2.50% of the Fund's average daily net assets for at least a year from the date of the Prospectus and for an indefinite period thereafter subject to annual re-approval of the agreement by the Board of Trustees.
An investor cannot invest directly in an index. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
Definitions: Net Asset Value (NAV) of the fund is calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is current value at which an asset or service can be bought or sold. Premium/Discount is provided to show the comparison of the daily net asset value (NAV) and the midpoint of the closing bid/ask for each of the funds. The
Renaissance IPO Index® (IPOUSA)
is a stock market index based upon a portfolio of U.S.-listed newly public companies that includes securities prior to their inclusion in core U.S. equity portfolios. The
Renaissance International IPO Index® (IPOXUS)
is a stock market index based upon a portfolio of newly public companies listed on non-U.S. exchanges. The S&P 500® Index (SPX) is a stock market index based on the market capitalizations of 500 large companies whose common stock is publicly traded on the NYSE.
Risk Disclosure: Investments in the
Renaissance IPO ETF, symbol "IPO"
Renaissance International IPO ETF, symbol "IPOS"
(the "ETFs"), and the
Global IPO Fund, symbol "IPOSX"
(the "Mutual Fund") are subject to investment risk, including possible loss of the principal amounts invested. The ETFs and the Mutual Fund (the "Funds") invest in companies that have recently completed initial public offerings. These stocks are unseasoned equities lacking trading history, a track record of reporting to investors and widely available research coverage which many result in extreme price volatility. Due to a greater number of IPOs in certain segments, the Funds may also be subject to information technology and financial sector risk, small and mid-capitalization company risk, and, for the Renaissance International IPO ETF, emerging markets risk. The Funds may hold securities in the form of Depository Receipts, REITs, and Partnership Units which have greater risks than common shares. The strategies have high portfolio turnover and securities lending risks. The returns of the ETFs may not match the return of the respective indices. The ETFs are classified as non-diversified investment companies subject to concentration risk.
Prospectus: Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus and/or summary prospectus with this and other information, please visit
. Read the prospectus carefully before investing. Renaissance Capital Investments, Inc., distributor for the Mutual Fund. Foreside Fund Services, LLC, distributor for the ETFs, 1-866-486-6645.
Definitions: The Renaissance IPO Index® is a stock market index based upon a portfolio of U.S.-listed newly public companies that includes securities prior to their inclusion in core U.S. equity portfolios. The S&P 500® Index is a stock market index based on the market capitalizations of 500 large companies whose common stock is publicly traded on the NYSE.
The information contained herein is proprietary and copyrighted. The media is welcome to use our information and ideas, provided that the following sourcing is included: Renaissance Capital - manager of IPO-focused ETFs.
The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital, the Renaissance IPO ETF (symbol: IPO), the Renaissance International IPO ETF (symbol: IPOS), or the Global IPO Fund (symbol: IPOSX), may have investments in securities of companies mentioned.
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