Following last week's market break, U.S. IPO activity resumed where it left off last week with five pricings, including ING U.S. (VOYA), which raised $1.3 billion. However, overall performance was subpar, with four of five of the deals achieving a total return of 6% or less and three of five IPOs failing to achieve a 1% first-day pop despite pricing sensitivity (three deals priced below the range). New deal activity, though, remained robust as five companies were added to the calendar, including American Residential Properties (OTC:ANRPZ), which is looking to raise $301 million and become the second single family-focused REIT to list this year. Last week also saw four new filers, most notably Apollo-backed teen jewelry retailer Claire's (OTC:CLEA), which filed for an IPO that we estimate could raise as much as $500 million.
ING U.S. marks second US IPO to raise over $1 billion in 2013
ING U.S., ING's American retirement, insurance and investment management business, priced its IPO at $19.50, below the $21 to $24 range, in what marked the largest deal since Zoetis' $2.2 billion IPO in January. The IPO was a forced sale by ING under the terms of its bailout from the Dutch government. ING will need to fully divest by the end of 2016. ING U.S., which will be rebranded as Voya Financial, traded up 7% on its first day and finished the week up 6%.
QIWI (QIWI), a leading provider of electronic payment services in Russia, was able to raise $213 million by offering 12.5 million ADSs (up from 12.0 million) at $17, the midpoint of the $16 to $18 range. It gained less than 1% in its first day of trading on Friday, making it the third consecutive payment processor, after EVERTEC (EVTC) and Blackhawk Network (HAWK), to produce mediocre returns. Concerns about falling fee levels and new competition from Russia’s top retail bank appeared to outweigh the promise of its fast-growing virtual wallet service, whose payment volume more than doubled to $5 billion in 2012.
Ellington Residential Mortgage REIT (EARN), which invests in Agency RMBS and non-Agency RMBS, priced its 6.5 million share IPO at $20, raising $129 million. The REIT, which traded off nearly 4% on the first day, marked the 13th mortgage REIT to have negative first day trading (going back to 2009). Cannabinoid-based therapeutics developer GW Pharmaceuticals (GWPH) raised $31 million by offering 3.5 million ADSs at $8.90. Despite an offer price that provided an 11% discount to the closing price of its AIM listing, the stock is only up 1.6%. Insys Therapeutics (INSY), a maker of supportive care drugs for cancer pain and related nausea, was able to raise $32 million by offering 4 million shares at $8, the low end of its revised range. The company priced 52% below the midpoint of its initial terms, but generated the best first day return (19%) from a biotech since Chimerix (CMRX) jumped 34% on April 11.
$816 million in deal volume added to the calendar as five companies set terms
PennyMac Financial Services (PFSI), which is focused on the production and servicing of U.S. residential mortgage loans, announced terms for a $200 million IPO last week. The company was founded by former Countrywide executives and more than tripled revenue in 2012. American Residential Properties (ARPI), a single-family residential properties REIT, launched a $301 million deal on Monday. The company manages a portfolio of more than 2,500 properties across ten states.
Emerge Energy (EMES), an LP formed by Insight Equity, set terms for a $150 million IPO. The company provides diversified energy services including producing frac sand and processing transmix fuel. First NBC Bank (NBCB), a full-service bank operating more than 30 branches in the New Orleans metropolitan area, announced terms for a $100 million IPO on Tuesday. It would be the third community bank to list this year. The last deal to launch last week was a $65 offering from Ambit Biosciences (AMBI), a biotech developing small molecule therapeutics with Astellas Pharma (OTCPK:ALPMF) for the treatment of cancer. Its lead drug candidate is currently in Phase IIb trials.
April finishes with 21 filings, May sees first two
Claire's, a global retailer that sells jewelry and accessories for young women and teens, filed on Friday to raise up to $100 million. The deal size is a likely a placeholder; we estimate that the company could raise $500 million. The company, which was acquired by PE firm Apollo for $3.1 billion in 2007, operates 2,705 stores in North America, Europe and China and had same store sales growth of 1.8% in fiscal 2012.
Colony American Homes (CAHO.RC), a leading single-family residential REIT, with 8,236 homes, filed on Thursday and is seeking to raise up to $100 million. The REIT, which is externally managed by PE firm Colony Capital, is the latest single-family residential-focused company to tap the public markets for capital to help it scale its business in a traditionally fragmented market.
The other two deals added to the pipeline last week were Cherry Hill Mortgage Investment (CHMI), a mortgage REIT investing in Excess MSRs, Agency RMBS and prime jumbo mortgage loans, and biotech Regado Biosciences (RGDO), which is focused on the discovery and development of drugs for cardiovascular indications.
Two companies withdraw IPO plans
Last week saw two companies withdraw their IPO plans, the first week to see more than one withdrawal in over a month. Language Line Services (LLS), a provider of on-demand language interpretation services, withdrew its plans for a $400 million IPO. The company had last filed an amendment in March 2010. Harvard Apparatus Regenerative Technology (HART) withdrew its plans after failing to list in the second week of April. The Harvard Bioscience carve-out now plans to be spun off to existing shareholders. To date, there have been 14 withdrawals, down 26% year-over-year.
IPO performance update
Despite the subpar performance of last week's deals, the bulls were out as several broader markets indices hit all-time highs, helping elevate recent IPO performance. The average return for the year's 49 IPOs is 17% (vs. 16% last week), and the average aftermarket return is 5% (vs. 3%). Total proceeds for the year reached $12.8 billion, up 12% from this time last year.