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Week ahead: As many as 17 IPOs could price during the week of June 22
Analyst IPO Market Commentary
17 companies are on the
to go public this week and raise $2.5 billion.
It should be the year's most active week in the IPO market; the second busiest week saw 10 IPOs in January. Investors have plenty of options this week, so expect IPO investors to demand discounts on some of the less hot deals, unlike last week where nothing priced below the midpoint but three broke issue. There are no high-growth consumer deals, which were
top-performing IPOs - Fitbit (
; +63%) and Fogo de Chão (
In the week ahead, four IPOs have proposed valuations of more than $1 billion. LBO'd credit bureau TransUnion is the largest, while others include three software makers, three energy transportation companies (two MLPs), one high-growth medical device maker, one well-funded stool-based biotech, the largest plastics equipment maker and the sixth largest producer of broiler chickens. Let's go!
Credit where credit's due: TransUnion is the week's largest IPO
) is set to raise $650 million at an enterprise value of $6.3 billion. Owned by Advent International and Goldman Sachs, it is the last major US credit bureau to go public after Equifax (NYSE: EFX) and Experian (LSE: EXPN). The company grew sales by over 15% in the first quarter to $350 million as credit report volumes surged. TransUnion is highly levered and unlike competitors it will not pay a dividend, but these concerns are mitigated by its strong free cash flow.
Tech surges with three software IPOs
Last week's fast-growing, highly-unprofitable software IPO, MINDBODY (
), priced at the midpoint and fell 17% on its debut, giving it the worst first-day performance for a tech IPO since November. This is not a positive sign for the upcoming software makers, but our
takers think they can be hot deals. These three will bring the number of second quarter tech deals up to ten, or more than double the first quarter.
) provides its 2.3 million subscribers with an automated platform for remotely managing home security systems and a variety of third-party devices, such as lights and solar panels. The "Internet-of-Things" tech company has been profitable since 2008, though the industry's increasingly competitive landscape (ADT, Honeywell, Google) could further decelerate growth and pressure margins. In the most recent quarter (MRQ), sales grew 25% to $46 million (63% gross margin) with $5 million in operating income.
) provides a SaaS platform for real estate owners to manage rental properties and for law firms to manage legal cases. Competing with larger vendors RealPage (NASDAQ: RP) and Yardi, AppFolio managed to grow revenue by 61% to $16 million in the MRQ (71% gross margin) and booked an operating loss of $3 million. Primary shareholder IGSB is investing $20 million (25% of the deal) on the offering. Led by former executives of top competitor Callidus Software (NASDAQ: CALD),
) provides a cloud-based platform that automatically tracks employee performance and compensates them accordingly. Its multi-billion market opportunity is under-penetrated: Most of its target businesses still rely on manual processes when determining which sales people deserve bonuses and which need an encouraging reminder that coffee is for closers. Revenue grew 17% to $18 million in the MRQ (59% gross margin) and it posted a $3 million operating loss.
An IPO to keep an eye on: High-growth glaucoma company Glaukos
) sells the smallest medical device ever approved by the FDA. It could mean big business, as the market for glaucoma products reached $5 billion in 2014. Privately funded with over $100 million by a group of well-regarded venture firms (Montreux, Versant, Domain, OrbiMed, Frazier, InterWest), Glaukos grew revenue by 78% to $15 million (81% gross margin) in the first quarter. It has sold over 70,000 of its glaucoma stents since its launch three years ago.
Seres business: The microbiome biotech
) recently entered Phase 2 trials for its lead candidate, an ecology of spores derived from human stool that replaces the good bacteria killed by antibiotics. It targets Clostridium difficile infection, labeled by the CDC as one of the top three most urgent antibiotic-resistant bacterial threats. Seres achieved a 97% clinical cure rate during its Phase 1/2 trial (87% achieved a primary efficacy endpoint), and the biotech should have close to $200 million in post-IPO cash.
Two more LBOs: Plastics equipment and medical imaging
) is set to raise $300 million to pay down debt. Since exiting bankruptcy in 2009, it has made major acquisitions to become the largest manufacturer of plastic processing equipment in the US. The highly levered company recently issued a major dividend to existing stockholders, but its margin expansion strategy and dominant market position could attract investors who believe in management's ability to execute.
) originally planned to go public in July 2014 at a $660 million enterprise value, but will attempt to price its $75 million IPO at a 10% lower valuation and with one more year of operations to analyze. Certain product lines have declined and a new competitor recently entered the US, but Lantheus' core DEFINITY medical imaging product had a 78% market share in December 2014 and it plans to favorably refinance its debt with IPO proceeds.
Some IPO investors are stickin' with chicken
) is the sixth largest producer of broiler chickens in the US. Spun out of Continental Grain, the company boasts a blue-chip customer base (Boar's Head, Chick-fil-A), a clean balance sheet and impressive free cash flow. However, some investors may be turned off by a potential peak in the market, large distributions to its parent as well as avian flu outbreaks. Wayne Farms plans to offer a 1.1% annual yield at the proposed $19.50 midpoint.
Two energy MLPs: Dividends from storing ethanol and mining coal
Green Plains Partners LP
) owns downstream storage and transportation assets for Green Plains (NASDAQ:GPRE), the fourth largest producer of fuel-grade ethanol in the US. The IPO candidate operates under fee-based agreements with parent Green Plains and its primary asset contracts range from 2.5 to 10 years, most of which include minimum volume commitments. The company plans to offer a quarterly dividend of $0.40, or an 8% annualized yield at the midpoint.
CNX Coal Resources LP
) owns a 20% interest in parent CONSOL Energy's (NYSE: CNX) Pennsylvania mining complex. Coal prices have declined in the past year while natural gas production has boomed. Last year's much larger coal MLP, Foresight Energy LP (
), trades 29% below its June 2014 offer price, and now provides an annual yield much closer to the 10% being pitched by CNX.
) was formed by the merger of General Maritime and Navig8 Crude in February. General Maritime emerged from bankruptcy in 2012, and the IPO candidate is now owned by a group of PE firms, such as Oaktree, BlueMountain Capital and Blackrock. It owns 46 oil tankers and will not offer a dividend. Its proposed market cap is $1.4 billion with an enterprise value of $1.8 billion. The last oil tanker IPO, Euronav (
), fell 1% on its first day but now trades 24% above its offer price.
Five small-cap IPOs: Three biotechs, a Chinese brick maker and a solar project acquirer
) claims that its drug delivery platform enables its lead candidate, now beginning Phase 1/2 trials, to target the entire population of boys with the fatal genetic disorder Duchenne muscular dystrophy. Backed by OrbiMed,
) plans to uplist from the OTCQB to the NASDAQ and raise $30 million as it moves into Phase 2 trials for iron deficiency in anemic patients with CKD.
), a biotech developing therapies for fibrocystic breasts and acne, plans to uplist from the OTCQB to the NASDAQ and raise $10 million at a $68 million market cap. Chinese brick maker
) and solar asset acquirer
) are back on the IPO calendar this week after they were unable to price last week. Lactose intolerance biotech
) could also go public this week, but the company slashed its proposed valuation to under $50 million, so Renaissance will not include the IPO in our tracking stats.
Renaissance Capital's IPO Calendar - Week of
June 22, 2015
$21 - $23
One of the three major credit bureaus in the US.
$20 - $22
BofA Merrill Lynch
The largest manufacturer of plastic processing equipment in the US.
New York, NY
$17 - $19
PE-backed operator of 46 oil tankers formed from General Maritime and Navig8 Crude.
$18 - $21
Sixth largest integrated producer and processor of broiler chickens in the US.
Green Plains Partners LP
$19 - $21
BofA Merrill Lynch
Green Plains-backed MLP that owns ethanol transportation and storage assets.
CNX Coal Resources LP
$19 - $21
BofA Merrill Lynch
MLP recently formed by CONSOL Energy to operate its Pennsylvania coal mines.
$15 - $17
BofA Merrill Lynch
Developing therapies that replace beneficial colon bacteria to treat infections.
$13 - $15
Cloud-connected security and home automation platform with 2.3 million subscribers.
$12 - $14
Provides a cloud-based platform for managing rental properties and legal cases.
San Jose, CA
$10 - $12
Provides a cloud-based platform that ties compensation to employee performance.
Laguna Hills, CA
$13 - $15
BofA Merrill Lynch
Sells micro-scale surgical devices for treating glaucoma.
North Billerica, MA
$8.50 - $10.50
Sells medical imaging agents used in the diagnosis of cardiovascular diseases.
$13 - $15
Cowen & Co.
Developing combined therapies for Duchenne muscular dystrophy and high cholesterol.
Developing a therapy for iron deficiency in anemic patients with chronic kidney disease.
$6.25 - $7.25
Chinese producer of fly-ash bricks and concrete used in construction.
$7 - $9
Roll-up planning to acquire 150 MW of solar energy projects in North Carolina.
Menlo Park, CA
$2.75 - $3.25
Developing therapies for fibrocystic breasts and acne.
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IPO pipeline update: 14 new companies added to the pipeline
submitted initial filings
last week. Half were biotechs, including the two largest filers with a $173 million deal size: immunotherapy biotech Conkwest (
) and Alzheimer's biotech vTv Therapeutics (
). Gigantism biotech Chiasma (
) could also draw interest. Google Capital-backed InnoLight Technology (
) was the only technology filer, while Ollie's Bargain Outlet (
) offers IPO investors a consumer play. Telecom offerings have become rare, but Ooma (
), a peer to Vonage, is looking to raise $86 million. The energy sector saw one coal MLP in Bowie Resource Partners (
) - interested investors will pay attention to the reception of this week's IPO from CNX.
IPO market snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has traded up 9% year-to-date, compared to 2% for the S&P 500. Renaissance Capital's
(NYSE: IPO) tracks the index, and top
include Alibaba (
), Hilton Worldwide (
) and Twitter (
). The Renaissance International IPO Index has traded up 9% year-to-date, compared to 6% for the ACWX. Renaissance Capital’s International
(NYSE: IPOS) tracks the index, and top
include Altice and Deutsche Annington.
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