U.S. IPO Recap: Twitter Launches $1.3 Billion IPO

by: Renaissance Capital IPO Research

Twitter (NYSE:TWTR) launched the most anticipated IPO of the year last week, seeking to raise $1.3 billion at a price range of $17 to $20. Seven other companies, including retail chain The Container Store (NYSE:TCS), also set terms. Four IPOs were completed, but only one resulted in a positive return. Five companies, each with less than $100 million in annual sales, were added to the pipeline.

Three IPOs see negative returns

All four IPOs last week priced below the range, and three produced negative returns on their first days of trading, which was partly attributable to their relatively low growth rates. CommScope (NASDAQ:COMM) completed the largest deal of the week, raising $577 million, and closed one cent below its offer price of $15. The Carlyle-backed company provides connectivity solutions for wireless, enterprise and residential broadband networks. Endurance International (NASDAQ:EIGI) had the worst return of the week, falling 6%. The Warburg Pincus and Goldman Sachs-backed company provides web hosting, domain services and other cloud solutions to 3.4 million small and mid-sized businesses around the world. Sprague Resources LP (NYSE:SRLP), which owns 15 refined products and materials handling terminals, traded down 1%. Aerie Pharmaceuticals (NASDAQ:AERI) was the only IPO to post a positive return, rising 6%. Led by former executives of ISTA Pharmaceuticals and Bausch + Lomb, Aerie is developing two treatments for glaucoma, one of which is entering Phase 3 trials in 2014.

IPO pricings (week of October 21, 2013)
Company (Ticker) Business Deal Size ($mm) Price vs. Midpoint Return as of 10/25
Aerie Pharmaceuticals (AERI) Glaucoma treatments $67 -23% 6%
CommScope (COMM) Connectivity solutions $577 -23% 0%
Sprague Resources LP (SRLP) Petroleum products $153 -10% -1%
Endurance International (EIGI) SMB web services $253 -20% -6%
Click to enlarge

Twitter kicks off roadshow for November 6 IPO

On Thursday, Twitter revealed the terms of its upcoming IPO. The microblogging service will offer 70 million shares at a price range of $17 to $20 for estimated proceeds of $1.3 billion. Revenue increased 106% to $422 million for the nine months ended September 30, 2013, and adjusted EBITDA rose to $31 million. The platform now has more than 215 million monthly active users, who post approximately 500 million Tweets per day. The pricing is reportedly set for November 6, with trading to begin on Thursday, November 7.

Seven others set terms

After Twitter’s billion-dollar offering, last week’s largest new deal was Avianca Holdings’ (NYSE:AVH) proposed $504 million deal. Avianca, a Panama-based Latin American airline, booked $4.4 billion in sales for the 12 months ended June 30. The last airline to go public, Mexico-based Volaris Aviation (NYSE:VLRS), is up 11% since its IPO in September.

The Container Store (TCS), a national retail chain that sells storage and organization products, launched a $188 million IPO. Controlled by private equity firm Leonard Green, it has 63 stores spread across 22 states and has achieved positive comps in 13 consecutive quarters.

IPOs setting terms (week of October 21, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Twitter (TWTR) Microblogging $1,295 $534
Avianca Holdings (AVH) Latin American airline $504 $4,414
Essent Group (NYSE:ESNT) Mortgage insurance $286 $107
The Container Store (TCS) Storage products $188 $736
Wix.com (NASDAQ:WIX) Web development $119 $59
Marcus & Millichap (NYSE:MMI) Brokerage firm $90 $414
Barracuda Networks (NYSE:CUDA) Security systems $81 $218
Mavenir Systems (NYSE:MVNR) Telecom networking $77 $82
Click to enlarge

Two Chinese tech firms are among five companies added to pipeline

Last week’s five new IPO filings pushed the month’s total to 30. Two of the five came from Chinese companies 500.com (NYSE:WBAI) and Sungy Mobile (NASDAQ:GOMO). 500.com is an online sports lottery service provider with 18 million registered users. Sungy Mobile provides applications and mobile platform development products and services. Its revenue increased 87% to $23 million in the first half of 2013. While Chinese IPOs have been scarce in the last few years, highly anticipated deals from 58.com (NYSE:WUBA) and Qunar.com (NASDAQ:QUNR) could help open the market when they price this week. Another technology company, Varonis (NASDAQ:VRNS), filed for a $100 million IPO. Varonis is an unstructured data specialist that helps companies manage their security, archiving and other data-related needs.

New IPO filers (week of October 21, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
American Petroleum Tankers LP (Pending:JAT) Energy transportation $173 $96
500.com (WBAI) Chinese sports lottery $150 $33
Varonis (VRNS) Unstructured data software $100 $67
Sungy Mobile (GOMO) App development $80 $41
Recro Pharma (NASDAQ:REPH) Pain treatments $28 $0
Click to enlarge

IPO market snapshot

The 173 IPOs in 2013 have raised $41.0 billion and produced an average return of 37%. There have been 63 IPOs in the past 90 days, with total proceeds of $17.5 billion and an average return of 31%. The active IPO pipeline includes 121 companies looking to raise a total of $34.0 billion.