Altice USA raised $1.9 billion - 42% more than originally planned - in the largest US IPO of a telecom since the 2000 blitz. The company traded up 13% by Friday's close. REITs had a bad week: Two REITs raised a combined $400 million and both broke issue, while a third postponed. Three blank check companies raised a total of $403 million.
| 3 IPOs During the Week of June 19th, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 6/23 |
| Altice USA (ATUS) | $1,918 | $22,112 | +3.4% | +9.0% | +14.3% |
| US arm of multinational Dutch cable company Altice. |
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| Granite Point Mortgage Trust (GPMT) |
$195 | $843 | -4.9% | -2.1% | -2.6% |
| Pine River-managed mortgage REIT focused on commercial real estate debt. |
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| Safety, Income and Growth (SAFE) |
$205 | $394 | 0% | -5.0% | -3.6% |
| Commercial REIT formed by iStar to acquire and manage ground net leases. |
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An Optimum IPO: Altice USA gains 14%
Altice USA (ATUS) raised $1.9 billion and finished the week up 14%. It is the second-largest IPO so far this year, behind only Snap (SNAP), and its deal size surpasses all 2016 IPOs. The company had planned to raise $1.35 billion, but the company priced above the midpoint at $30 and insiders offered additional shares. Formed by parent Altice N.V.'s acquisitions of Cablevision (Optimum) and Cequel (Suddenlink), Altice USA has over $9 billion in sales (39% EBITDA margin). The cable and internet provider has successfully grown revenue per customer in the face of cord cutting trends, while cutting costs to drive margin expansion. Its high cash flow should help it pay down a massive debt burden.
Commercial REITs get wrecked: Two break issue, one postpones
Two commercial-focused REITs spun out of public companies IPO'd this past week, and both traded down. Spun out of Two Harbors Investment (NYSE: TWO), Granite Point Mortgage Trust (GPMT) priced below the range to raise $195 million at a market cap of $843 million, but still finished the week down 3%. Granite Point benefits from a large market of commercial loan maturations, but its near-term ROE will likely be pressured as it deploys capital. Spun out of iStar (NYSE: STAR), Safety, Income and Growth (SAFE) raised $205 million at a market cap of $364 million. Safety's "ground net leases" are generally safer than the properties owned by its peers, but it came to market with a lower yield and had disclosed conflicts of interest with iStar. Investors may also have been wary of these REITs given the rising interest rate environment.
Four Springs Capital Trust (FSPR), a commercial REIT with 48 properties, had planned to raise $101 million at a market cap of $217 million, but postponed. The company had exposure to the struggling retail sector, and its current cash flow was not enough to cover its proposed dividend.
A blank check trio in a SPAC-heavy year
Three blank check companies priced IPOs this past week. Lost most SPACs, each traded within 1% of its offer price. The largest, Hennessy Capital Acquisition III (HCAC.U), raised $225 million as it targets a US industrial company. It follows Dan Hennessy's previous blank check ventures, which resulted in acquisitions of bus maker Blue Bird and trucking company Daseke. Constellation Alpha Capital (CNACU) raised $125 million, looking to acquire an Indian healthcare business. China-based Bison Capital Acquisition (BCACU), formed by an ex-partner at NEA, raised $53 million. 14 SPACs have raised $4.2 billion so far this year, more than all of 2016, putting the year on track to be the most active for SPAC IPOs since 2007.
IPO pipeline update: Five new filings
Five companies joined the IPO pipeline this past week. Government IT contractor Vencore (VNCR) filed to raise $250 million. PetIQ (PETQ), a distributor of vet recommended pet products, filed to raise $86 million. Yoga studio chain YogaWorks (YOGA) filed to raise $75 million. Ocular inflammation biotech Kala Pharmaceuticals (KALA) submitted an $86 million IPO filing. And last, gene-edited crop trait developer Calyxt (CLXT.RC), a spin-off of Cellectis (CLLS), filed for a $50 million IPO.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 21.9% year-to-date, ahead of the S&P 500, which is up 8.9%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Ferrari (RACE) and First Data (FDC). The Renaissance International IPO Index is up 15.2% year-to-date, while the ACWX is up 13.0%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Covestro and Worldpay. To find out if this is the best ETF for you, visit our IPO Investing page.
