This week's highlights:
6 IPOs, including 3 biotechs and 2 payment firms, raised $1.4 billion ahead of the short week
Payment processor EVO Payments was the week's winner, up 24%
Point-of-sale loan platform Greensky raised $874 million, opening -4% and finishing +8%
More new IPOs filings than any week since June 2015; expect a very active June
Slow week for IPOs coming up, but expect a number of launches
The average return for 2018 IPOs remained at about 23%. YTD IPOs have averaged a +13% first-day gain and +8% in the aftermarket. Currently, 68% of the year's 75 IPOs trade above issue. This past week, markets ticked slightly higher: Our IPO Index was up 0.3%, while the S&P 500 gained 0.5%. The VIX Volatility Index remained comfortably below 15.
| 6 IPOs During the Week of May 21st, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 05/25 |
| EVO Payments (EVOP) | $224M | $1,234M | 7% | +19% | +24% |
| Global merchant acquirer and full-service payment processor. | |||||
| Kiniksa Pharmaceuticals (KNSA) | $153M | $931M | 0% | +8% | +8% |
| Developing therapies for inflammatory and autoimmune conditions. | |||||
| GreenSky (GSKY) | $874M | $4,345M | 5% | +2% | +8% |
| Operates a digital lending platform that facilitates merchant financing. | |||||
| Scholar Rock (SRRK) | $75M | $350M | 0% | +11% | +7% |
| Biotech targeting growth factor inhibition for spinal muscular atrophy. | |||||
| CLPS (CLPS) | $11M | $70M | 0% | +5% | +3% |
| Provides professional IT services to financial firms in China. | |||||
| Iterum Therapeutics (ITRM) | $80M | $184M | -13% | -1% | -1% |
| Developing oral and IV antibiotics for drug-resistant bacterial infections. | |||||
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Payments IPOs Price Up Then Pay Up, Averaging +16%
EVO Payments (EVOP) priced at the high end of the range to raise $224 million, finishing the week with a 24% gain. EVO's payment processing peers have been on the rise, and the company may sustain its strong organic growth by repeating its success in Poland and Mexico in other markets with low penetration of electronic payments.
Greensky (GSKY) raised $874 million - 17% more than expected - at a $4.3 billion market cap. All proceeds went to insiders. The stock opened below issue, very unusual for a deal that prices at the high end of the range, and finished its first day up just 2%. Large deals generally have lower pops. The digital lending platform then surged 6% on Friday. Greensky's valuation hinges on it maintaining its high growth and strong margins. It should see upside if it successfully enters elective healthcare lending, assuming its core position in US home improvement spending remains strong.
Three Biotechs Average +5%; Below Average, but Better Than Recent Biotechs
Scholar Rock Holding (SRRK) raised $75 million by pricing at the midpoint. The company traded up 11% on its first day, in line with the YTD average but better than the previous 7 biotechs. Backed by Fidelity, Polaris, ARCH VP and others, Scholar Rock is targeting spinal muscular atrophy, the same indication as 2016 IPO AveXis (AVXS), recently acquired for $8.7 billion. However, it is still very early stage.
Kiniksa Pharmaceuticals (KNSA) raised $153 million at a market cap of $931 million, the year's second-largest biotech to go public. It traded up 8%. Having raised over $320 million from Baker Brothers and others, the biotech now has over $350 million in cash to develop its in-licensed drug candidates targeting inflammatory and autoimmune conditions. Close peer InflaRx (IFRX) is up more than 125% from its November 2017 IPO.
Iterum Therapeutics (ITRM) offered additional shares at $13, below the range, to raise its targeted $80 million. It declined 1% Developing antibiotics for drug-resistant infections, Iterum has three candidates in Phase 3 trials. However, peer trading has been mostly negative, with Melinta (MLNT) and Spero (SPRO) down about 65% and 13%, respectively, this year.
Short for ChinaLink Professional Service, CLPS (CLPS) raised $10.5 million at a market cap of $70 million by pricing at the $5.25 midpoint. The IT services provider traded up just 3%. After a slow fiscal 2017, sales grew 55% to $22 million with operating income of $1 million in the six months ended December, 2017, the most recent period that it provided.
US IPO Pipeline Update: 14 new filings, biggest week since June 2015
This week, the IPO pipeline saw thirteen new additions, plus one SPAC. That is the highest weekly filing count since June 2015. Mostly healthcare and nothing huge: KKR-backed RIA consolidator Focus Financial Partners (FOCS) was the largest with an estimated deal size of $300 million. The latest wave of new filers follows the 6 (+2 SPACs) that came in the prior week. That points to an active IPO market in June.
| 13 Filings & 1 SPAC During the Week of May 21st, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| AVROBIO (AVRO) | $86M | Health Care | Morgan Stanley |
| Developing gene therapies to treat cancer and rare diseases. | |||
| Carbon Natural Gas (CRBO) | $75M | Energy | RBC |
| Oil and gas E&P operating in the Appalachian, Illinois and Ventura Basin areas. | |||
| Eidos Therapeutics (EIDX) | $115M | Health Care | JP Morgan |
| Developing a novel oral therapy for rare neurodegenerative diseases. | |||
| Essential Properties (EPRT) | $100M | Real Estate | Goldman |
| Triple-net-lease REIT that manages single-tenant commercial properties. | |||
| i3 Verticals (IIIV) | $86M | Technology | Cowen |
| Provides integrated payment processing and software to SMBs. | |||
| Focus Financial Partners (FOCS) | $300M | Financials | Goldman |
| Operates a national network of more than 50 independent wealth managers. | |||
| Kezar Life Sciences (KZR) | $81M | Health Care | Jefferies |
| Developing small molecule therapeutics to treat autoimmune diseases and cancer. | |||
| Magenta Therapeutics (MGTA) | $100M | Health Care | JP Morgan |
| Developing novel therapies to make stem cell transplants more effective. | |||
| Xeris Pharmaceuticals (XERS) | $75M | Health Care | Jefferies |
| Developing a novel formulation of an injectable hypoglycemia treatment. | |||
| Aptinyx (APTX) | $80M | Health Care | JP Morgan |
| Developing therapeutics for neurological disorders. | |||
| HyreCar (HYRE) | $11M | Technology | Network 1 |
| Provides a peer-to-peer car-sharing marketplace. | |||
| Far Point Acquisition (FPAC.U) | $400M | SPAC | Credit Suisse |
| Blank check company formed by former NYSE Group President Tom Farley and Third Point to acquire a fintech business. | |||
| Verrica Pharmaceuticals (VRCA) | $86M | Health Care | BofA ML |
| Developing a drug-device that administers cantharidin for warts and skin diseases. | |||
| ElectroCore (ECOR) | $75M | Health Care | Piper Jaffray |
| Commercializing a non-invasive nerve stimulation device for treating migraines. | |||
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned 3.3% year-to-date, while the S&P 500 is up 2.8%. 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 down -1.1% year-to-date, while the ACWX is down -0.1%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and Samsung BioLogics.
