US IPO activity was light last week, as the market entered its typical end of August slow down. Regado Biosciences (RGDO), a cardiovascular disease biotech that has been trying to list since mid June, was finally able to complete its deal, but only after slashing its valuation 63%. Three companies submitted initial filings, including real estate brokerage franchisor RE/MAX (RMAX) and Chinese semiconductor company Montage Technology Group (MONT).
Regado slashes its valuation, prices $43 million deal at $4 per share
Regado Biosciences, which is developing a break-through anticoagulant system for cardiovascular surgeries, raised $43 million in the only deal to price last week. The deal was originally scheduled to price in June, but postponed after failing to drum up sufficient investor demand at its originally proposed $219 million valuation. The company was forced to slash its valuation 63% to $82 million to complete the deal and is the first IPO to price below $5 per share since biotech Regulus Therapeutics (RGLS) went public on October 4, 2012. Thanks to its heavily reduced valuation, the company traded well on its first day, gaining almost 18%.
|IPO pricings (week of August 19, 2013)|
|Company (Ticker)||Business||Deal Size ($mm)||Price vs. Midpoint||Return*|
|Regado Biosciences (RGDO)||Cardiovascular biotech||$43||-73%||25%|
Three deals added to IPO pipeline, heavy deal flow expected after Labor Day
RE/MAX Holdings, one of the world’s leading franchisors of real estate brokerage services, submitted an initial filing for a $100 million deal last week. RE/MAX is a close peer of Realogy Holdings (RLGY), which operates brands such as Century 21 and Coldwell Banker and is up 56% from its October 10, 2012 IPO.
Montage Technology Group, a China-based fabless provider of analog and mixed-signal semiconductor solutions for set-top boxes, also filed last week and is looking to raise up to $115 million. Montage is the first chip company to file since Ambarella (AMBA) went public on October 9, 2012 and would be only the second Chinese company to list in the US this year, following Chinese e-commerce company LightInTheBox’s (LITB) public offering in early June. LightInTheBox raised almost $79 million and initially performed well (up over 130% at its peak), but traded off last week after reporting 2Q13 revenue below street expectations.
Enzymotec (ENZY), an Israeli company that develops lipid-based nutritional ingredients and medical foods and is looking to raise $75 million, was the third company to join the IPO pipeline last week. The company sells novel key ingredients for health products such as infant formula and nutritional supplements, as well as branded medical foods.
|New IPO filers (week of August 19, 2013)|
|Company (Ticker)||Business||Deal Size ($mm)||LTM Sales ($mm)|
|Montage Technology Group (MONT)||Set-top box chips||$115||$90|
|RE/MAX Holdings (RMAX)||Real estate brokerage||$100||$152|
|Enzymotec (ENZY)||Lipid-based nutrition||$75||$51|
Although activity has been light during the typical end of August slow down, we expect a number of deals will launch post-Labor Day, as the market gears up for a busy fall. One company, telecom infrastructure services provider Intercloud Sytems (ICLD), is already on the calendar for the first week of September. Other deals we expect to see in September include a variety of tech companies, such as cyber security company FireEye (FEYE), ad tech firm Rocket Fuel (FUEL), benefit management SaaS provider Benefitfocus (BNFT) and online education platform Chegg (CHGG). All four have made initial public filings this month after filing confidentially earlier this year. We could also see another wave of biotechs after Labor Day, including targeted treatment developer BIND Therapeutics (BIND), eye disease biotech Ophthotech (OPHT), orphan disease biotech Fate Therapeutics (FATE) and cancer treatment developer Acceleron Pharma (XLRN).
IPO market snapshot
The 131 IPOs in 2013 have raised $28.5 billion and produced an average return of 28%. There have been 59 IPOs in the past 90 days, with total proceeds of $11.6 billion and an average return of 23%. The active IPO pipeline includes 100 companies looking to raise $29.8 billion.