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US IPO Weekly Recap: BlackLine soars but 5 IPOs struggle including year's largest offering
Analyst IPO Market Commentary
Six IPOs raised $2.3 billion this past week, including the year's largest US offering, China's logistics giant
. ZTO priced above the range and proceeded to drop 15% on its first day, highly unusual given its pricing premium, size and origin. In fact, all four of this week's broken IPOs raised more proceeds than expected. The IPO market's one bright spot this past week was software platform
, which popped 39%.
October was the year's most active month by deal count (19) and proceeds ($4.6 billion). However, this past week's flops are the latest in a series of broken October IPOs; 10 of the 19 deals (53%) are below issue, and they include 4 of the year's 7 double-digit first-day drops. While still well above the offer price, recent high-flying tech IPOs have been plummeting, including
; -31% over the past month),
; -49%) and
; -24% from first-day close).
6 IPOs Priced During the Week of October 24th, 2016
Provides a cloud-based platform for automating financial reporting.
Acushnet Holdings (GOLF)
Manufactures and markets golf equipment under several brands (e.g. Titleist).
Ra Pharmaceuticals (RARX)
Developing small molecule therapies for rare immune disorders.
Quantenna Communications (QTNA)
Fabless designer of next-generation chipsets for high-speed Wi-Fi networks.
ZTO Express (ZTO)
Second-largest Chinese express delivery company by volume.
Myovant Sciences (MYOV)
Preclinical biotech developing therapies based on CRISPR/Cas9 gene editing.
Investors make a beeline for BlackLine: Tech platform up 39%
) priced at the high end of its upwardly revised range to raise $146 million, then popped 39%. The company is backed by Silver Lake and ICONIQ Capital, and existing investors took down 10% of the deal. BlackLine gave investors a clean high growth story with strong gross margins, and its IPO valuation was below the peer group average.
), the week's other tech IPO, raised $107 million. It priced at the high end, likely helped by the recent success of high-growth tech deals, but ended its first day down 3%. While Quantenna benefits from secular demand for improved Wi-Fi networks, its growth hinges on an uncertain ability to expand beyond its core customer group, even while facing increasingly tough competition from larger companies.
Chinese delivery company drops off
), the year's largest US IPO, raised $1.4 billion in a highly-anticipated offering. China's second-largest delivery company priced a dollar above the range at $19.50, but initial indications of $19-21 quickly dashed hopes for a hot deal; the stock lost support and finished its debut down 15%. A market leader, ZTO offered both growth and profitability. While some investors were quick to get out of a broken deal, others may have been turned off by its heavy reliance on Alibaba and Chinese e-commerce and an unclear competitive advantage that could threaten margins.
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Golf company slices, then putts in a 6% gain
) sliced its valuation by pricing 24% below the midpoint, and raised $329 million in the week's second-largest IPO. It broke issue at the open, but quickly recovered and finished Friday up 6% thanks to an end-of-day rally. Selling the #1 brand of golf ball (Titleist), golf shoe (FootJoy) and golf glove, Acushnet generates strong free cash flow, and plans to offer a 2.8% annualized dividend. However, investors were likely concerned over the sport's declining participation in the US.
Biotechs both break
) raised $218 million at a market value of $914 million in the year's largest biotech IPO. It is one of only three biotech IPOs this year to price above the midpoint, but it dropped 12% on day one, below its original midpoint. Formed earlier this year with no outside capital, the hedge fund-backed biotech plans to take a late-stage drug to commercialization.
(RARX) raised $92 million by offering 23% additional shares at the midpoint; Ra finished its first day at the offer price and declined 1% by Friday.
The week's SPAC IPO,
GTY Technology Holdings
) raised $480 million, up from the original target of $300 million, and finished the week up 1.2%.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 3% year-to-date, while the S&P 500 is up 4%. Renaissance Capital's
(NYSE: IPO) tracks the index, and
top ETF holdings
include Alibaba (
) and Citizens Financial Group (
). The Renaissance International IPO Index is down 2% year-to-date, compared to +3% for ACWX. Renaissance Capital’s International
(NYSE: IPOS) tracks the index, and
top ETF holdings
include Recruit Holdings and Samsung C&T.
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