• Another Unicorn Becomes a Pegasus: Zuora flies up 47%
• Alzheimer's Biotech Delays IPO, Energy SPAC Raises $360 million
• Technology Sector Leads 2018 IPO Market
• New IPO Filings: Cybersecurity Firm Carbon Black and Chinese Streaming Site HUYA
Zuora (ZUO) continued a streak of high-flying tech unicorns. The company launched its IPO at $10, priced at $14, and finished above $20 (+47% gain). Coming public at a valuation of $1.6 billion, it is the year's fourth tech unicorn IPO. The other three, Spotify (SPOT), Dropbox (DBX), Zscaler (ZS) each command premium valuation multiples. Investors are paying up for growth.
Backed by Benchmark Capital, founder-led Zuora is a leading provider of subscription billing software. That makes it a SaaS play on the proliferation of SaaS plays, and its market should rapidly approach $10 billion in the next five years. That said, it currently has relatively low gross margins and high operating losses.
Alzheimer's biotech Alzheon (ALZH) failed to price its $70 million IPO. While it addresses a large market, Alzheon's sole clinical-stage drug is not novel, and its unconventional backers were not buying on the IPO. The Alzheimer's space is notoriously challenging: Just look at the YTD performance of 2015-2016 IPOs vTv Therapeutics (VTVT; -88% YTD), Axovant (AXON; -76%) and AC Immune (ACIU; -26%).
Oil and gas blank check company Pure Acquisition (PACQU) raised $360 million in an upsized offering. The SPAC was formed by CEO Jack Hightower, who serves as Chairman and CEO of sponsor HighPeak LP, and previously led Bluestem Energy Partners and Celero Energy.
| 2 IPOs During the Week of April 9th, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 04/13 |
| Zuora (ZUO) | $154M | $1,643M | 40% | +43% | +47% |
| Provides a cloud-based subscription billing and management platform. | |||||
| Pure Acquisition (PACQU) | $360M | $435M | 0% | +1% | +1% |
| Blank check company formed and led by oil and gas veteran Jack Hightower. | |||||
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2018 IPOs: 50% Trade Above Issue, with Tech in the Lead
Just half of the year's IPOs trade above issue, with an average return of 5%. By sector, technology leads, averaging a 26% gain from IPO. The energy sector has come back, up 13% on average. Health care IPOs now average a loss of -5%, and this week Menlo Therapeutics (MNLO) was the latest crash (though large M&A could support the sector). Chinese deals have underperformed; the six $25+ million deals average a -10% loss.
US IPO Pipeline Update: Carbon Black and HUYA File, Plus Two Banks, Two Biotechs and a SPAC
| 7 Filings During the Week of April 9th, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| Evelo Biosciences (EVLO) | $100M | Health Care | Morgan Stanley |
| Developing microbial therapies that act on the gut to treat inflammatory diseases. | |||
| Abpro (ABP) | $69M | Health Care | UBS |
| Preclinical biotech developing novel antibodies for various cancers. | |||
| BayCom (BCML) | $58M | Financials | FIG Partners |
| California bank with 17 full-service branches and $1.2 billion in assets. | |||
| Trinity Merger (TMCXU) | $300M | SPAC | B. Riley & Co. |
| Blank check company formed by Trinity Investments to acquire a real estate business. | |||
| Origin Bancorp (OBNK) | $90M | Financials | Stephens |
| Louisiana bank with 41 branches and $4.2 billion in assets. | |||
| Carbon Black (CBLK) | $100M | Technology | Morgan Stanley |
| Provides cloud-based endpoint security software. | |||
| HUYA (HUYA) | $200M | Technology | Credit Suisse |
| Live streaming platform for video games and e-sports spun out of China's YY. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 1.5% year-to-date, while the S&P 500 is down -0.7%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and Snap (SNAP). The Renaissance International IPO Index is up 5.0% year-to-date, while the ACWX is up 0.4%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and Samsung BioLogics.
