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Week Ahead: An empty IPO calendar, even as markets become more receptive

March 4, 2016
Week Ahead

No deals are on the calendar for the week ahead.

KLR Energy Acquisition (KLREU), a blank check company led by the former CEO of EPL Oil & Gas, will attempt to raise $100 million in the week ahead. The SPAC had been scheduled for a $130 million offering in the prior week.

Market conditions improve, again

The S&P 500 has climbed 8% in the past three weeks, while the Renaissance IPO Index surged 16%. During that time, the VIX Volatility Index remained below 25. It closed below 17 for the first time this year, which could set the stage for a rebound in IPO activity. Despite this, new filing activity has dried up, suggesting that a broad recovery for the IPO market is at least several weeks away.

Companies going public after a stretch of inactivity have historically outperformed; during these times only IPOs with solid fundamentals pitched at attractive valuations are enough to reignite investors' interest. We note that biotechs have marched to their own beat, however. 

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Which IPOs to expect
Hutchison China MediTech (HCM), which markets drugs and develops immuno-oncology therapies, filed terms for a US listing (it trades on the AIM in London) that could raise $100 million at a market cap of $2 billion. Profitable high-growth tech company Acacia Communications (ACIA) appears primed for an IPO with updated financials and peers reporting strong fourth quarter earnings. Biotech IPOs could continue to price. Syndax was able to complete its IPO last week; the five biotech IPOs average a return of 25%, thanks to Editas Medicine (EDIT; +122%) and BeiGene (BGNE; +35%). Of the biotech IPOs in the pipeline, eight filed in January - likely candidates for upcoming IPOs.

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 10% year-to-date, compared to -2% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Synchrony Financial (SYF), Alibaba (BABA) and Citizens Financial Group (CFG). The Renaissance International IPO Index is down 7% year-to-date, compared to -3% for ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include NN Group and Recruit Holdings. To find out if this is the best ETF for you, visit our IPO Investing page.