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US IPO Weekly Recap: Tech and landscaping IPOs secure top two first-day pops of 2016
Analyst IPO Market Commentary
This past week saw four IPOs raise over $400 million, making it the year's busiest week by deal count. The first venture capital tech IPO, Acacia Communications, had the year's best first-day pop (+35%), while CD&R's landscaping LBO, SiteOne, had the year's second-best debut (+27%). We attribute their success to strong business fundamentals, demonstrating growth and profitability, pitched at a discount to peers.
Tech takes over: Acacia's 35% first-day pop is best of 2016
) priced at $23, the high end of the range, and popped 35% on Friday. The first venture-backed tech IPO of 2016 came to market well below its optical peers despite Acacia's much faster growth and superior margins. The company will have to maneuver past a recent trade restriction on its top customer, but thanks to an industry-wide data center upgrade, the demand for its high-speed optical networking products may be great enough for them to reach the end customers. While the year's other tech IPO, security services provider
; -11%), is dogged by unimpressive growth and margins, Acacia's success suggests that IPO investors are still interested in growth stocks - an encouraging sign for the high-growth tech names in the backlog.
IPO landscape welcomes private equity as SiteOne surges 34%
SiteOne Landscape Supply
) priced at the $21 midpoint to raise $210 million (100% from insiders) and finished the week up 34%. Carved out of John Deere by CD&R, SiteOne offered investors a chance to own the only national distributor of professional landscape supplies; a business with solid 7% organic growth and strong cash flows at a reasonable discount to peers.
Keep on rolling: Zig-Zag maker Turning Point prices down and gains 9%
Turning Point Brands
) raised $54 million by pricing its IPO at $10, a 29% discount to the midpoint (the year's largest for a non-biotech), and finished the week up 9%. Shareholders invested $34 million (63%), which TPB used to redeem PIK notes held by those shareholders. The US seller of Zig-Zag rolling papers priced at a reasonable discount, likely a result of its declining sales (-2% in 2015), heavy debt load and lack of a dividend.
Biotechs go one for three: Oncobiologics prices down and plummets 20%
Originally scheduled for the prior week,
) slashed its proposed price by 50% and sweetened the IPO with warrants in order to raise $35 million (57% bought by insiders) at a market cap of $152 million. Those warrants appear less sweet after its -20% drop on the first day, the worst debut for an IPO since August 2015. The micro-cap biotech hopes to compete with the likes of AbbVie, Amgen and Roche as it develops biosimilars to blockbuster drugs.
Fungal disease biotech
) postponed its $86 million IPO, despite insiders indicating on nearly half the deal. Micro-cap biotech
Cancer Prevention Pharmaceuticals
) has again pushed back its $25 million offering (20% insider); deal timing is now set as day-to-day.
IPO Pricings: Week of May 9th, 2016
Acacia Communications (ACIA)
Provides low-power, high-speed interconnect modules for optical networks.
SiteOne Landscape Supply (SITE)
National distributor of commercial and residential landscape supplies.
Turning Point Brands (TPB)
Sells tobacco products in the US under the Zig-Zag and Stoker's brands.
Developing biosimilars of blockbuster drugs Humira and Avastin.
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Filings, launches and updates
Five companies joined
this past week, including the second-largest US food distributor,
), a 2007 LBO from CD&R and KKR that plans to raise $1 billion. There were two new initial filings: Apollo's life insurance and annuities provider
), with an estimated $1 billion deal size; and China-based English learning platform
China Online Education Group
), with a $100 million deal size. The week's most notable update from the IPO pipeline was Albertsons (
) disclosure of fiscal 2015 financials; the Cerberus-backed LBO postponed its $1.6 billion IPO back in October 2015, and could be gearing up for a second go.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 8.2% year-to-date, while the S&P 500 is up 0.1%. Renaissance Capital's
(NYSE: IPO) tracks the index, and
top ETF holdings
include Alibaba (
), Synchrony Financial (
) and Citizens Financial Group (
). The Renaissance International IPO Index is down 3.9% year-to-date, compared to -1.3% for ACWX. Renaissance Capital’s International
(NYSE: IPOS) tracks the index, and
top ETF holdings
include NN Group and Aena S.A.
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