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US IPO Weekly Recap: Payments unicorn Square gains 43% after slashing price

November 20, 2015
Weekly Recap

All five IPOs priced at the low end or below the range this week but finished Friday with a positive return.

That dynamic has become more common for IPOs in the past 90 days.

Three IPOs refused to meet investors' demands and postponed, citing market conditions.

Three high-growth IPOs post a range of positive returns (from our Thursday night blog post)
Jack Dorsey's Square (SQ) slashed its price by 25% from the midpoint to $9 - below the $11 Series D round in 2012 - and proceeded to pop 45% on high volume (1.8x the float). Its projected growth is about twice that of the payment processor peer average, but investors likely demanded a valuation haircut to offset risks associated with its transition to profitability. While IPO "downrounds" have not been uncommon for recent biotechs, Square's decision to discount is certainly notable for its size (42% below 2014 Series E) and initial success. And its cut is not surprising, given the returns of other high-profile "unicorns" this year (Box: -8%, Etsy: -47%, Pure Storage: -13%).

Profitable online dating company Match Group (MTCH), which owns, OkCupid, Tinder and PlentyOfFish, priced at the low end of the range to raise $400 million and finished the week up 23%. Parent company IAC has been getting less love - the stock has traded off 12% in the past month. Match Group offers investors one of the only ways to play the online dating craze: now management must prove that it can execute on the monetization of Tinder without turning off its users.

Duluth Holdings (DLTH) which sells Duluth brand work and outdoor apparel via its website, catalog and stores, raised $80 million. Compared to its outdoor apparel, footwear and specialty retailer peers, it has strong cash flow and higher growth projections. To attain that growth, the company must continue to successfully open retail stores. Duluth went public against a weak backdrop as the retail sector tumbles, including close peer Boot Barn (BOOT). Duluth commanded a market cap of $385 million at its $12 offer price - 20% below its originally proposed midpoint - and finished Friday up 14% at $13.65.

Mimecast (MIME) priced at the low end and raised $78 million. It first traded up about 20%, but then broke issue in the afternoon and finished the weekup just 1%. The email security and archiving solutions provider has experienced high growth and the ability to turn a profit, but the landscape is competitive and foreign currency exposure has hit the bottom line.

5 IPOs during the week of November 13, 2015
Company (Ticker)                           Business                                                     Deal size ($mm) IPO price vs. midpoint 1st-day pop Return at 11/20
Square (SQ) High-growth payment processing unicorn $243 -25% 45% 43%
Match Group (MTCH) Top online dating platforms $400 -8% 23% 27%
Duluth Holdings (DLTH) Branded work apparel online $80 -20% 14% 14%
Mimecast (MIME) Email security and archiving $78 -9% 1% 2%
Axsome Therapeutics (AXSM Biotech: Pain and CNS $51 -25% -3% 1%
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IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 7% year-to-date, compared to +1% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Citizens Financial Group (CFG) and Hilton Worldwide (HLT). The Renaissance International IPO Index is down 3% year-to-date, in line with the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Recruit Holdings and Samsung C+T. To find out if this is the best ETF for you, visit our IPO Investing page.