US IPO Week Ahead: China gets its coffee fix in a 7-IPO week

Seven IPOs are set to raise $4.85 billion in the week ahead, along with one blank check company. In addition to two REITs, a biotech, a small software maker, and a chemicals distributor, the line-up includes two high-growth unicorns: China-based coffee retailer Luckin Coffee (LK) and San Francisco-based website speed platform Fastly (FSLY). 

The week's other notable IPO news is Slack's (SK) Investor Day presentation scheduled for Monday, May 13, ahead of a direct listing that could come in June.

Founded less than two years ago, Luckin Coffee plans to raise $480 million at a market cap of $3.9 billion, as it takes advantage of China's growing thirst for coffee. It has built out a network of coffee shops across China at breakneck speeds, with over 2,300 stores at quarter-end. The company booked trailing sales of about $190 million, with revenue soaring to $70 million in the 1Q19 from $2 million in the prior year period. Its growth has come at a high cost, both with heavy discounting/marketing and intense capex spending. 

Backed by August Capital and ICONIQ Capital, founder-led Fastly is the latest Silicon Valley unicorn to tap public markets, targeting $169 million at a valuation of $1.5 billion. It provides a next-generation web infrastructure platform to enterprises, helping them improve site speeds. Fastly grew sales by 38% in 2018, though its gross margin (56%) and operating margin (-18%) are below most peers. 

Avantor (AVTR) is the week's largest IPO, raising $3.0 billion. That would make it the largest IPO of an LBO'd company since 2011. Avantor nearly quintupled its sales when it acquired chemicals and lab supplies giant VWR in late 2017, and believes it can realize hundreds of million in synergies over the next few years. However, the company is highly leveraged from its LBO.

PIMCO Mortgage Income Trust (PMTG) is a newly-formed mortgage REIT aiming to raise $1.0 billion to acquire its initial portfolio.

The week includes two holdovers from last week, diabetes biotech Applied Therapeutics (APLT), which is scheduled as day-to-day, and post office REIT Postal Realty Trust (PSTL).

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The following IPOs are expected to price this week:

AGBA Acquisition (AGBAU), a blank check company targeting the services sector in China, plans to raise $40 million by offering 4.0 million shares at a price of $10.00. At that price, AGBA Acquisition would command a market value of $52 million. AGBA Acquisition was founded in 2018. The Kowloon, Hong Kong-based company plans to list on the Nasdaq under the symbol AGBAU. Maxim Group is the lead bookrunner on the deal.

Avantor (AVTR), an LBO'd provider of laboratory supplies and services, plans to raise $3.0 billion by offering 154.0 million shares at a price range of $18.00 to $21.00. At the midpoint of the proposed range, Avantor would command a market value of $8.6 billion. Avantor, which was founded in 1904, booked $5.9 billion in sales over the last 12 months. The Radnor, PA-based company plans to list on the NYSE under the symbol AVTR. Goldman Sachs, J.P. Morgan, BofA Merrill Lynch and Barclays are the joint bookrunners on the deal. The company is also raising $500 million in a concurrent offering of 10 million mandatory convertible preferred shares.

ConversionPoint Holdings (CPTI), which provides an AI-integrated SaaS platform for marketing and e-commerce services, plans to raise $40 million by offering 6.2 million shares at a price range of $6.00 to $7.00. At the midpoint of the proposed range, ConversionPoint Holdings would command a market value of $194 million. ConversionPoint Holdings, which was founded in 2016, booked $113 million in sales over the last 12 months. The Newport Beach, CA-based company plans to list on the Nasdaq under the symbol CPTI. Oppenheimer & Co. and GMP Securities are the joint bookrunners on the deal.

Fastly (FSLY), which provides an optimized content delivery network to increase website data speeds, plans to raise $169 million by offering 11.3 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, Fastly would command a market value of $1.5 billion. Fastly, which was founded in 2011, booked $158 million in sales over the last 12 months. The San Francisco, CA-based company plans to list on the NYSE under the symbol FSLY. BofA Merrill Lynch, Citi and Credit Suisse are the joint bookrunners on the deal.

Luckin Coffee (LK), a Chinese coffee retailer offering pick-up and delivery via a mobile app, plans to raise $480 million by offering 30.0 million shares at a price range of $15.00 to $17.00. At the midpoint of the proposed range, Luckin Coffee would command a market value of $3.9 billion. Luckin Coffee, which was founded in 2017, booked RMB1.3 billion in sales over the last 12 months. The Xiamen, China-based company plans to list on the Nasdaq under the symbol LK. Credit Suisse, Morgan Stanley, CICC and Haitong International are the joint bookrunners on the deal. Louis Dreyfus Company has agreed to invest $50 million in a concurrent private placement.

PIMCO Mortgage Income Trust (PMTG), a newly formed residential mortgage REIT managed by PIMCO, plans to raise $1.0 billion by offering 50.0 million shares at a price of $20.00. At that price, PIMCO Mortgage Income Trust would command a market value of $1.0 billion. PIMCO Mortgage Income Trust was founded in 2018. The Newport Beach, CA-based company plans to list on the NYSE under the symbol PMTG. Credit Suisse, BofA Merrill Lynch, Goldman Sachs and Morgan Stanley are the joint bookrunners on the deal. PIMCO parent, Allianz, intends to purchase up to $25 million of the IPO (2.5% of deal).

Applied Therapeutics (APLT), currently scheduled as day-to-day, is a Phase 2 biotech developing therapies for diabetic cardiomyopathy that plans to raise $60 million by offering 4 million shares at a price range of $14 to $16. At the midpoint of the proposed range, Applied Therapeutics would command a fully diluted market value of $292 million. Applied Therapeutics was founded in 2016 and plans to list on the Nasdaq under the symbol APLT. Citi, Cowen and UBS Investment Bank are the joint bookrunners on the deal. 

Postal Realty Trust (PSTL), a recently-formed REIT that manages and leases properties to the USPS, plans to raise $100 million by offering 5.0 million shares at a price range of $19.00 to $21.00. At the midpoint of the proposed range, it would command a market value of $144 million. Postal Realty Trust, which was founded in 2018, booked $8 million in revenue over the last 12 months. The Cedarhurst, NY-based company plans to list on the NYSE under the symbol PSTL. Stifel, Janney Montgomery Scott, BMO Capital Markets and Height Capital Markets are the joint bookrunners on the deal.

Renaissance Capital will have Pre-IPO Research available on each of these upcoming IPOs prior to its pricing.

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 5/9/19, the Renaissance IPO Index was up 33.2% year-to-date, while the S&P 500 had a gain of 15.3%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Elanco (ELAN) and VICI Properties (VICI). The Renaissance International IPO Index was up 11.0% year-to-date, while the ACWX was up 9.7%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include SoftBank and Xiaomi.