U.S. IPO Recap: 9 Set Terms, 8 File As Market Springs To Life

by: Renaissance Capital IPO Research

The US IPO market saw a jolt of activity last week, as nine companies set terms and eight submitted initial filings. The newly scheduled deals included two $500 million offerings, from top U.S. homebuilder Taylor Morrison (NYSE:TMHC) and leading satellite service provider Intelsat (NYSE:I), and the new filings were the most in more than a year. The spike in filing activity featured four very fast-growing technology companies, including three enterprise software vendors and a next-generation telecom equipment supplier. Independent Bank Group (NASDAQ:IBTX), a small Texas bank, was the week's lone IPO pricing. It priced at the high end of the range to raise $83 million, and traded up 10%.

Two large, private equity-backed deals from Taylor Morrison and Intelsat
Taylor Morrison Home Corporation, an Oaktree (NYSE:OAK) and TPG-backed U.S. homebuilder, is the third IPO this year expecting strong growth because of the U.S. housing recovery. The previous two have performed well: Boise Cascade (NYSE:BCC) is up 47%, and TRI Pointe Homes (NYSE:TPH) has gained 14%. Intelsat, the world's largest provider of satellite services to businesses, booked $2.6 billion in sales in 2012 and is backed by private equity firms BC Partners and Silver Lake.

Yield play activity continues
Nearly half of first quarter IPOs paid a dividend, and two more yield plays were added to the calendar last week. Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI), a structured REIT that provides financing for clean energy projects, expects to raise $200 million. KNOT Offshore Partners (NYSE:KNOP), an LP backed by a Norwegian / Japanese joint venture, owns four shuttle tankers that transport crude oil under long-term charters. It plans to raise $149 million.

Apollo-backed Taminco and Hurricane Sandy-affected Fairway Market move forward
Taminco Corporation, the top global producer of alkylamines for industrial and agricultural applications, announced terms for a $300 million deal. Carved out of biopharmaceutical company UCB in a 2003 sale to private equity firm AlpInvest Partners, Taminco was sold to private equity firms CVC Capital Partners in 2007 and current owner Apollo (NYSE:APO) for $1.4 billion in 2011. The company previously tried to raise close to $500 million in an IPO on the Euronext Brussels in early 2010.

Fairway Group (NASDAQ:FWM), which operates 12 high-end grocery stores in the greater New York City area and plans to open two additional stores in 2013, launched a $150 million deal. The Sterling Investment Partners-backed company had delayed its deal in late 2012 because of Hurricane Sandy, which forced one of its 12 stores to close for four months.

Rally Software leads a group of smaller deals
Fast growing Rally Software (NYSE:RALY), which provides on-demand software to manage Agile-based software development projects, is seeking $69 million. Its primary venture capital backers include Boulder Ventures, Mobius and Mohr Davidow Ventures. Two development-stage biotechs also set terms. Omthera Pharmaceuticals (NASDAQ:OMTH), which is developing therapies for abnormalities in blood lipids, plans to raise $75 million. Chimerix (NASDAQ:CMRX), which is developing a potent antiviral therapy for use in stem cell transplants, hopes to raise $85 million.

Most initial filings since passage of JOBS Act
New filing activity has shot up recently, with 20 deals added to the IPO pipeline in the past three weeks (out of 43 total new filings year-to-date). The eight new filers last week were the most since the week of March 19, 2012, shortly before the passage of the JOBS Act created the confidential filing process. All of the new deals were small, proposing deal sizes of $150 million or less, and at least seven of the eight were previously confidential filers that could launch offerings before the end of the month. Additionally, four of the eight were high-growth technology deals, which were mostly absent in the first quarter.

Much anticipated offerings from Tableau and Marketo
Tableau Software (DATA), which provides interactive data visualization software, filed for a $150 million IPO. Backed by venture capital firm New Enterprise Associates and its three founders, Tableau has grown sales at a 91% CAGR since 2009, more than doubling revenue in 2012 to $128 million, and it has been profitable for the past three years. Among the largest of its approximately 11,000 customers are several industry leaders, including Verizon (NYSE:VZ), GlaxoSmithKline (NYSE:GSK), DuPont, Nike (NIKE) and BBC.

Marketo (MKTO), which provides on-demand marketing software for B2B professionals, filed to raise up to $75 million. Sales increased 80% to $58 million in 2012 while the customer base expanded to over 2,000 enterprises. The company has yet to realize any profits, having lost $34 million in 2012. Notable venture capital backers include InterWest Partners, Storm Ventures, Mayfield Funds, Institutional Venture Partners and Battery Ventures. In December 2012, recent IPO and competitor Eloqua (NASDAQ:ELOQ) was acquired by Oracle (NASDAQ:ORCL) for $871 million, representing a 104% premium from its August 2012 offer price.

Displaying equally explosive growth, Cyan (CYNI) and Textura (TXTR) filed for $75 million and $50 million IPOs, respectively. Cyan provides next generation packet-optical transport systems for software-defined networks (SDNs), and generates revenue both from hardware sales and from software subscriptions and licenses. Founded by a team from broadband equipment supplier Calix (NYSE:CALX), Cyan booked $96 million in 2012, a 137% increase year-over-year, and is backed by several venture capital firms, including Norwest. Textura, which provides an online collaboration platform for the construction industry, grew revenues 106% to $22 million in its 2012 fiscal year.

Four other filers include Californian homebuilder and regional bank
Seeing the success of TRI Pointe (TPH), Boise Cascade (BCC) and hopefully Taylor Morrison, northern Californian homebuilder UCP (UCP) filed for a $125 million IPO. Ellington Residential Mortgage REIT (EARN), a mortgage REIT investing in Agency and non-Agency RMBS, filed for a $100 million IPO. The company was formed through a strategic venture between affiliates of Ellington Financial (NYSE:EFC) and Blackstone (NYSE:BX). All three mortgage REIT IPOs to price in 2013 have struggled: ZAIS Financial (NYSE:ZFC) is down 3%, Five Oaks Investment (NYSE:OAKS) is down 0.4% and Orchid Island Capital (NYSE:ORC) is trading 7% below its offer price.

Biotech Receptos (RCPT) is looking to raise $86 million to fund clinical trials of its Phase 3 drug candidate for relapsing multiple sclerosis. Finally, TriState Capital (TSC), a bank serving middle market businesses in the Northeast, filed for a $70 million IPO. It hopes to capitalize on the moderately successful receptions seen by two other regional bank IPOs in 2013: NJ-based ConnectOne Bancorp (CNOB; up 6%) and Texas-based Independent Bank Group (IBTX; up 10%).

US IPO market performance update
Although they continue to outpace the broader markets, U.S. IPO returns have fallen slightly over the past two weeks. The total average return for the year's 32 IPOs is 17%, down from 19%, and the average aftermarket return is 3%, down from 5%. Total proceeds are up 26% year-over-year to $7.7 billion.