An active 4Q17 powers ahead with 11 IPOs scheduled to raise $2.0 billion in the coming week. That would make it the IPO market's busiest week of the year. The activity level is unsurprising given the 32 new filings in October, a two-year high. We also expect a number of IPOs to launch this week in order to price before Thanksgiving.
China's recent surge of US IPOs continues this week with three deals, each boasting a large market, fast growth and profitability. Mobile search engine Sogou, the country's #2 player, aims to raise $540 million in the week's largest offering. China-based consumer lending platform PPDAI Group and tutoring company Four Seasons Education also plan to IPO in New York. Suburban office REIT Workspace Property Trust is raising $527 million with a 4% yield. Communications platform Bandwidth is raising $84 million to kickstart growth. We'll also see two $100+ million biotech IPOs, InflaRx and Apellis Pharmaceuticals, and three regional banks, TX-based CBTX, NY-based Metropolitan Bank, and PA-based Meridian Bank.
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| US IPO Calendar | ||||
| Issuer Business |
Symbol Exchange |
Deal Size($m) Market Cap($m) |
Price Range Shares Filed |
Bookrunners |
| Meridian Bank Malvern, PA |
MRBK Nasdaq |
$40 $107 |
$17.00 - 19.00 2,222,222 |
Sandler O'Neill |
| Commercial bank with 22 locations in the Philadelphia MSA. | ||||
| AMERI Holdings Princeton, NJ |
AMRH Nasdaq |
$8 $111 |
$6.51 1,228,878 |
Northland Securities |
| Outsourced provider of IT services to SAP customers. | ||||
| CBTX Beaumont , TX |
CBTX Nasdaq |
$60 $619 |
$24.00 - 26.00 2,400,000 |
Stephens Inc. Keefe Bruyette |
| Commercial bank with locations throughout Southeast Texas. | ||||
| Four Seasons Education China |
FEDU NYSE |
$101 $524 |
$9.00 - 11.00 10,100,000 |
Morgan Stanley Citi China Renaissance |
| Chinese provider of after school math tutoring services in Shanghai. | ||||
| InflaRx Germany |
IFRX Nasdaq |
$100 $362 |
$14.00 - 16.00 6,667,000 |
J.P. Morgan Leerink Partners BMO Capital |
| Developing antibodies for rare autoimmune and inflammatory diseases. | ||||
| Metropolitan Bank Holding New York, NY |
MCB NYSE |
$101 $267 |
$31.00 - 34.00 3,100,000 |
J.P. Morgan Keefe Bruyette |
| Commercial bank with five branches in the New York MSA. | ||||
| Apellis Pharmaceuticals Crestwood, KY |
APLS Nasdaq |
$150 $750 |
$13.00 - 15.00 10,714,000 |
Citi J.P. Morgan Evercore ISI |
| Developing a novel protein inhibitor for autoimmune and inflammatory diseases. | ||||
| Sogou China |
SOGO NYSE |
$540 $4,784 |
$11.00 - 13.00 45,000,000 |
J.P. Morgan Credit Suisse Goldman Sachs |
| China's second largest mobile search engine backed by Tencent and Sohu. | ||||
| Bandwidth Raleigh, NC |
BAND Nasdaq |
$84 $423 |
$20.00 - 22.00 4,000,000 |
Morgan Stanley KeyBanc Capital Baird |
| VoIP network offering voice and text software APIs to enterprises. | ||||
| PPDAI Group China |
PPDF NYSE |
$298 $5,714 |
$16.00 - 19.00 17,000,000 |
Credit Suisse Citi |
| Leading Chinese peer-to-peer online lending platform. | ||||
| Workspace Property Trust Horsham, PA |
WSPT NYSE |
$527 $1,038 |
$12.00 - 15.00 39,000,000 |
Goldman Sachs J.P. Morgan BofA Merrill |
| REIT focused on US suburban office and flex real estate. | ||||
Hat-trick from China: Search, loans and education
Sogou (SOGO) is China's second-largest provider of mobile search, a multi-billion-dollar market. It is also the fastest-growing, taking share from dominant player Baidu. It boasts a track record of strong free cash flow and profitability, but we note its heavy reliance on traffic from Tencent, also a key backer.
PPDAI Group (PPDF) is raising almost $300 million at a market cap of $5.7 billion (5.7% float). A leading peer-to-peer lending platform, PPDAI's IPO closely follows the October IPO of Chinese lending peer Qudian (QD), which surged in initial trading before giving up most of its gains. Like Qudian, PPDAI boasts explosive growth and high margins, but the company has a short operating history at scale and faces shifting regulations.
More Chinese fintech IPOs have lined up to go public: Jianpu Technology (JT) is scheduled for mid-November, three micro-cap deals are in the IPO pipeline, and another is in our Private Company Watchlist (available for Renaissance Capital institutional clients).
Four Seasons Education (FEDU) plans to raise $101 million in the the year's fourth US IPO of a Chinese education provider. Its peer group soared to all-time highs in mid-October and even after a slight pull back, Bright Scholar Education (BEDU; 129% from IPO) and RYB Education (RYB; 39%) have held up, while last month's RISE Education (REDU; -8%) had a weaker reception. A provider of after-school math tutoring, Four Seasons grew at 55% in the 1H17 with an impressive 35% EBITDA margin, but its concentration in Shanghai has started to cut into enrollment growth.
$500 million REIT IPO offers a play on suburbia
Workspace Property Trust (WSPT) is targeting $527 million at a billion-dollar market cap. The US suburban office REIT is backed by Saudi family office Safanad and NY-based Square Mile Capital. It intends to pay a 4% initial yield at the midpoint.
The CPaaS pivot: Bandwidth to kickstart API growth
Bandwidth (BAND) plans to raise $84 million to market its CPaaS (communications platform-as-a-service). Competing with high-growth 2016 IPO Twilio (TWLO; +102% from IPO), Bandwidth should benefit as more enterprises integrate communication services into apps. The provider of VoIP APIs has historically been profitable with modest growth, but now plans to spend heavily on sales and marketing to accelerate CPaaS growth.
Two immunotherapy biotechs take a complement inhibitor public
Both biotech IPOs this week are developing drugs that inhibit the immune system's complement system to target a variety of autoimmune and inflammatory diseases.
Kentucky-based Apellis Pharmaceuticals (APLS) plans to raise $150 million as it readies its sole candidate for multiple Phase 2 and 3 trials in 2018, initially targeting an eye disease and a rare blood disease. Its drug addresses markets with unmet needs and potentially-lucrative pricing, but trials will be costly, and a host of competitive drugs are in development. Backed by Morningside Group, insiders have indicated on $70 million (47% of the deal). Its fully diluted market cap of $750 million would be the year's largest for a US biotech.
Germany-based InflaRx (IFRX) is raising $100 million as it prepares to enter Phase 2b trials in the beginning of 2018 for a rare inflammatory skin disease. Backers include RA Capital and Bain Capital, and insiders plan to buy $40 million on the IPO (40%).
Three regional banks: Houston, NYC and Philadelphia
CBTX (CBTX), a community bank with 34 branches in Houston and Beaumont, TX, plans to raise $60 million at a market cap of $619 million. With $3 billion in assets, it has steadily improved ROE and ROA. However, asset growth has been muted, and the disruption from Hurricane Harvey could impact earnings in the near term.
Metropolitan Bank Holding (MCB) is a Manhattan-based commercial bank with $1.6 billion assets that provides loans to middle market companies and high-net-worth real estate investors. To date, the company has experienced rapid growth in the competitive NY banking market. With plans to use IPO proceeds to add a sixth branch, investors will weigh its heavy Manhattan commercial real estate concentration with its track record of consistent earnings growth.
Meridian Bank (MRBK), a commercial bank with branches and mortgage offices around Philadelphia, plans to raise $40 million at a market cap of $107 million.
Last, OTCQB-listed AMERI Holdings (AMRH) plans to raise $8 million in a Nasdaq uplisting. The outsourced IT services provider booked $47 million in sales during the LTM, with a -14% EBITDA margin.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 33.4% year-to-date, ahead of the S&P 500, which is up 15.6%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include First Data (FDC) and Square (SQ). The Renaissance International IPO Index is up 27.1% year-to-date, while the ACWX is up 22.8%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Japan Post and ABN AMRO Group. To find out if this is the best ETF for you, visit our IPO Investing page.
