Strong Performance by This Week's IPOs

by: Renaissance Capital IPO Research

The three deals completed this week all posted impressive returns despite the volatile market environment, marking a positive end to the second quarter for the IPO market. Leading the crop was electric carmaker Tesla Motors (NASDAQ:TSLA), which generated buzz among IPO investors as a risky plan on clean technology. The company raised $226 million by selling 13.3 million shares at $17 after originally planning to raise $167 million by offering 11.1 million shares at a range of $14-$16. The stock has since experienced volatile trading and unusually high volume, climbing 41% in its debut before falling 20% in aftermarket trading, and ranked second among our list of highest first day returns year-to-date (after Financial Engines (NASDAQ:FNGN)).

The other two IPOs this week were both China-based companies that bucked the trend of poor performance set by other Chinese ADRs so far this year (only two out of ten are trading above the IPO price). AutoNavi (NASDAQ:AMAP), which licenses digital map content for navigation and location-based services in China, raised $89 million by selling 7.4 million ADSs at $10, below the $11-$13 range. The company, which shares a leading market position with China-based competitor NavInfo, saw its stock rise 8% after listing on the NASDAQ on July 1st and has since gained an additional 10% in the aftermarket.

Chinese outsourcing company HiSoft Technology International (HSFT) held its own with a total return of 10%; it rose 4% in its debut and an additional 6% in aftermarket trading. The outsourcer is led by former HP executives and hopes to grow its top line by taking advantage of the growing demand for outsourced IT and R&D services, particularly among domestic Chinese companies. HiSoft raised $74 million by offering 7.4 million ADSs at $10 and cited brand recognition as a major reason for going public.

The strong performance exhibited by this week's IPOs coupled with the growing backlog shows developing confidence in the recovery of the IPO market. Though IPO activity will cool off next week with the Monday holiday and only one deal, Fortune Bank (NASDAQ:FBBC), expected to price, the following week already has three deals on the IPO calendar: interactive whiteboard producer SMART Technologies (NASDAQ:SMT), business intelligence software firm Qlik Technologies (NASDAQ:QLIK) and 3D technology licensor RealD (NYSE:RLD).