Large deals from Santander Consumer USA (SC) and Rice Energy (RICE) posted pedestrian returns last week, while Care.com (CRCM) had the first substantial IPO pop of the year, jumping 43%. The site lifted the year’s average IPO return from 4% to a still-anemic 9%, but more hits could be on the calendar, which is suddenly full after 11 companies set terms last week. Six companies submitted initial IPO filings, bringing the month’s number of new filers to 22, the most in January in at least 10 years.
Care.com gains 43%, but larger deals struggle
Care.com (CRCM), a marketplace for arranging child care, senior care and other household needs, has generated a 94% revenue CAGR since 2010 and had 527,000 paying members as of September 2013. It priced above the range, raising $91 million, and continued a very strong run for technology IPOs. Santander Consumer USA (SC) raised $1.8 billion and finished the week up less than 1%. The subprime auto lender is mostly owned by Santander, but private equity firms Centerbridge, KKR and and Warburg Pincus invested $1.0 billion in 2011. Rice Energy (RICE) also completed a large deal, bringing in $924 million, and gained less than 5%. Rice is backed by Natural Gas Partners and led by an unusually young executive team, including a 27-year-old CFO.
| IPO pricings (week of January 20, 2014) | ||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | Return as of 1/24 |
| Care.com (CRCM) | Marketplace for finding and managing family care | $91 | 13% | 43% |
| Rice Energy (RICE) | Natural gas E&P | $924 | 5% | 4% |
| Santander Consumer USA (SC) | Subprime auto loans | $1,800 | 4% | 1% |
Large group of new deals includes six health care IPOs
Intrawest Resorts (SNOW) launched the largest new deal last week, seeking $250 million. Acquired by Fortress in 2006 for $2.8 billion, it operates six mountain resorts and a heli-skiing adventure company. Continental Building Products (CBPX) set terms for a $225 million IPO. Continental, a manufacturer of drywall and complementary finishing products, was acquired by Lone Star Partners for $700 million in August 2013. GeoPark (GPRK), which is looking to raise $180 million, is a Chilean producer of oil and natural gas. Founded in 2002, it has drilled 145 wells and has completed six acquisitions in the past three years. The New Home Company (NWHM), which set terms for a $125 million IPO, is a single-family homebuilder with control of more than a thousand lots in California. Most of the remaining newly scheduled deals were biotech IPOs, all with deal sizes below $75 million.
| IPOs setting terms (week of January 20, 2014) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Intrawest Resorts Holdings (SNOW) | Mountain resorts and heli-skiing | $250 | $526 |
| Continental Building Products (CBPX) | Drywall and complementary finishing products | $225 | $376 |
| GeoPark (GPRK) | South American oil and natural gas E&P | $180 | $319 |
| North Atlantic Drilling (NADL) | Offshore drilling rigs | $125 | $1,297 |
| The New Home Company (NWHM) | Single-family homebuilding in CA | $125 | $85 |
| Genocea Biosciences (GNCA) | Vaccines via T cell immune responses | $72 | $1 |
| uniQure (QURE) | Orphan disease treatments | $64 | $3 |
| Eleven Biotherapeutics (EBIO) | Eye disease treatments | $60 | $1 |
| Dicerna Pharmaceuticals (DRNA) | Liver disease and cancer treatments | $60 | $6 |
| Argos Therapeutics (ARGS) | Cancer and HIV immunotherapies | $60 | $5 |
| Egalet (EGLT) | Abuse-deterrent pain treatments | $42 | $0 |
Three $500+ million deals added to the pipeline
Four private equity-backed companies, three of which are looking to raise $500 million or more, submitted initial IPO filings last week. Sabre (SABR.RC), a technology provider for travel agents and the operator of Travelocity, is backed by TPG Capital and Silver Lake. It booked $3.1 billion in sales for the year ended September 30, 2013. Party City (PRTY), a party supply retailer with more than 880 locations, was acquired by Thomas H. Lee in June 2012 at a valuation of $2.7 billion. Blackstone-backed Catalent (CTLT) is a major provider of drug delivery technology for the pharmaceutical industry, producing more than 70 billion doses annually. Finally, Prestige Cruises (PRCI.RC) is a luxury cruise vacation company that was formed by Apollo through its acquisitions of Oceania Cruises in 2007 and Regent Seven Seas Cruises in 2008.
| New IPO filers (week of January 20, 2014) | |||
| Company (Ticker) | Business | Deal Size ($mm) | LTM Sales ($mm) |
| Sabre (SABR.RC) | Travelocity site and travel industry technology | $750* | $3,057 |
| Party City Holdco (PRTY) | Party supplies | $500 | $1,981 |
| Catalent (CTLT) | Drug delivery technology | $500* | $1,803 |
| Prestige Cruises International (PRCI.RC) | Cruise vacations | $250 | $1,175 |
| Achaogen (AKAO) | Antibacterial treatments | $75 | $16 |
| Resonant (RESN) | Radio signal filters for mobile devices | $14 | $0 |
IPO market snapshot
While last week’s IPOs held onto their gains through the market rout, the Renaissance IPO ETF (symbol IPO), a portfolio of newly public companies, turned negative and is now down 1.4% so far in 2014. This suggests that IPO investors could become more price sensitive and selective about the IPOs on the calendar. The 8 IPOs in 2014 have raised $4.3 billion and produced an average return of 9%. There have been 57 IPOs in the past 90 days, with total proceeds of $18.2 billion and an average return of 43%. The active IPO Pipeline includes 107 companies looking to raise a total of $24.0 billion.
