U.S. IPO Pricing Recap: GoPro Captures Extreme Gains In 11 IPO Week

by: Renaissance Capital IPO Research

Action camera maker GoPro gained 49% while crafts retailer Michaels fell flat in a week with 11 IPOs. GoPro (NASDAQ:GPRO) and Michaels (NASDAQ:MIK) were two of four companies that raised at least $400 million, and only two of the 11 IPOs ended the week with negative returns. The 11 pricings brought June’s IPO total to 30, tied for the most in a month since October 2004. Nearly two thirds of 2014 IPOs are trading above their offer price and the average total return is 19%, both of which are highs since early April.

GoPro shines but two other consumer IPOs struggle

GoPro priced at the high end of its range, gained 31% on its first day and traded up 14% more on Friday. Led by its surfer-turned-entrepreneur CEO, GoPro has tripled sales to nearly $1 billion in the last two years, selling 3.8 million units in 2013. The more mature retailer Michaels priced at the low end of its range and ended Friday just two cents above its offer price. It was acquired in a $6 billion 2006 LBO by Bain and Blackstone. A third consumer-focused IPO, TCP International (NYSE:TCPI), produced the worst return of the week. The family-owned lighting products company fell 7% after pricing below the range.

NextEra continues strong energy IPO run, ServiceMaster gains 10%

NextEra Energy Partners (NYSEMKT:NEP) priced well above the range ($25 vs. $19-$21) and still gained 28% on Friday. NEP’s parent company is NextEra Energy, the largest producer of wind and solar energy in North America. Three other dividend-paying power-producing IPOs (Pattern Energy, NRG Yield and Abengoa Yield) from the last year have all produced returns greater than 30%. ServiceMaster Global (NASDAQ:SERV) completed the largest deal of the week, raising $610 million. The Clayton, Dubilier & Rice-backed company ($5.1 billion LBO in 2007) has leading shares in termite/pest control and home warranties, but its customer count has been declining, and it carries more than $3 billion in debt. The company priced below the range and gained 10%.

Chinese online company Xunlei and two health care companies perform well

Xunlei (NASDAQ:XNET), which offers digital content acceleration and online video services in China, completed the year’s 10th US IPO by a Chinese company. After Xunlei’s 26% gain, eight of the ten are up at least 20%. Xunlei previously attempted an IPO in 2011 and received a $290 million investment from Xiaomi/Kingsoft in March. Two health care companies also saw strong gains. Amphastar Pharmaceuticals (NASDAQ:AMPH), which makes hard-to-manufacture generic drugs, priced 36% below its midpoint but gained 50%. Adeptus Health (NYSE:ADPT), an operator of free-standing emergency rooms, traded up 15%.

Mediocre performance for software companies Materialise and Imprivata

Materialise (NASDAQ:MTLS), a Belgian provider of 3D printed goods and software to operate networks of 3D printers, fell 1% last week. 3D printing companies have had a rough 2014, but most have performed well over the last month. Materialise, founded in 1990, is relatively mature though, and competition, particularly in printing services, has been rising. Imprivata (NYSE:IMPR), which provides authentication software to hospitals, is a market leader, but the company is unprofitable and has seen growth slow. Finally, MOKO Social Media (NASDAQ:MOKO), which operates a social media mobile ad network and an Australian flash sales site, completed a small $8 million deal and gained 3%.

IPO pricings (week of June 23, 2014)
Company (Ticker) Business Deal Size ($mm) IPO Price vs. Midpoint Return as of 6/27
Amphastar Pharmaceuticals (AMPH) Generic drug manufacturer $56 -36% 50%
GoPro (GPRO) Producer of wearable action cameras $427 7% 49%
NextEra Energy Partners, LP (NEP) Wind and solar energy project operator $406 25% 28%
Xunlei (XNET) Digital content acceleration provider in China $88 20% 26%
Adeptus Health (ADPT) Freestanding emergency room operator $108 7% 15%
ServiceMaster Global Holdings (SERV) Pest control service and appliance warranty provider $610 -13% 10%
Imprivata (IMPR) Health care access management software provider $75 0% 8%
MOKO Social Media (MOKO) Mobile ad network and flash sale site operator $8 -9% 3%
The Michaels Companies (MIK) Arts and crafts retailer $472 -6% 0%
Materialise (MTLS) 3D printing software and services provider $96 -8% -1%
TCP International Holdings (TCPI) LED and CFL lighting products manufacturer $79 -21% -7%

IPO market snapshot

So far this year, 145 IPOs have raised $31.4 billion and produced an average first day return of 14%. The Renaissance IPO ETF (symbol: IPO), a float cap-weighted basket of newly public companies and indicator of post-IPO performance, has gained 4% compared with 6% for the S&P 500. Over the last 30 days, the IPO ETF has risen 6% compared with 2% for the S&P 500, suggesting that the IPO market could remain active after the July 4th holiday. The active IPO pipeline includes 132 companies looking to raise a total of $50.6 billion.