Out of the seven IPOs that were scheduled to price Wednesday night, six were completed and began trading Thursday in what was the busiest day in the IPO market since November 8, 2007 (when six IPOs raised an aggregate of $908 million). Retail REIT Excel Trust (EXL) pushed its pricing to Thursday night.
Despite generating buzz as two of this week's more highly anticipated deals, speech generating device provider DynaVox (OTCPK:DVOX) and Shell-backed biocatalyst developer Codexis (CDXS) both priced at the low end of their respective ranges of $15-$17 and $13-$15 before listing on the NASDAQ today. Given that DynaVox lacks a solid group of comparables and that Codexis has yet to reach commercial scale in its applications to the biofuels industry, the valuations for both companies were difficult to gauge, which may have contributed to pricing pressure.
Also listing on the NASDAQ were biopharmaceutical firm Alimera Sciences (ALIM), IP-based communications systems provider Mitel Networks (MITL) and supply chain software firm SPS Commerce (SPSC). Alimera (ALIM), which is developing an injectable steroid to treat ophthalmic diseases, raised $72 million by selling 6.6 million shares at $11, well below its $15-$17 range. Like most pharmaceutical companies that have recently gone public, Alimera's high risk profile may have overshadowed its drug's blockbuster potential and could have resulted in the push for a bigger IPO discount.
Small to mid-sized enterprise-focused Mitel also priced below its $18-$20 range at $14, raising a total of $147 million; its pricing may have been impacted by Tuesday's disappointing results from Toronto-listed competitor Aastra Technologies. SPS Commerce was the only IPO to avoid pricing at the low end or below its range, raising $49 million by offering 4.1 million shares at $12, at the midpoint of its $11-$13 range. Shares of Mitel and SPS Commerce are up 9% and 19%, respectively.
The only NYSE listed IPO was Global Geophysical (GGS), which opened at $12 and was up 1% in Thursday morning trading. The high resolution 3D seismic data provider cut its IPO price by 25% from its proposed range of $15-$17 and offered 4 million fewer (insider) shares, raising a total of $90 million. Though the company could benefit from rising oil prices and increased demand from E&P companies in the longer term, the volatility of the industry may have dampened IPO investor enthusiasm.
Despite substantial improvements in the IPO market and signs of recovery in the overall economy, Wednesday's wave of lower-than-expected IPO pricings suggests investors continue to take a disciplined approach to their deal selections and push for discounts. There have been only five IPOs to price above the range this year (out of 39 total IPO pricings): Financial Engines (FNGN); MaxLinear (MXL); China Lodging Group (HTHT); Primerica (PRI) and Metals USA (MUSA). That said, lower-than-expected IPO pricings have often led to strong performance, as evidenced by Ironwood Pharmaceuticals (IRWD) (up 27%), Piedmont Realty Trust (PDM) (up 34%), Graham Packaging (GRM) (up 30%) and Generac Holdings (GNRC) (up 18%). These companies suggest that some of this week's IPOs may still perform well in the weeks to come. There are currently three deals on the IPO calendar for next week.