U.S. IPO Pricing Recap: 3 Small And Discounted Deals Price Before The Holiday

Includes: GBIM, ISTR, NERV
by: Renaissance Capital IPO Research

Three IPOs each raised less than $50 million during the shortened holiday week. Two biotechs and one regional bank all priced below their proposed ranges, but finished the week above the IPO price. Last week's IPO activity continues what we saw in the second quarter: Deals are still being completed if companies are willing to adjust valuations. Not all deals go through though, as Taggares Agriculture, which operates vineyards and apple orchards in the Pacific Northwest, withdrew plans for its $46 million IPO ($54 million market cap).

GlobeImmune (NASDAQ:GBIM) had the week's greatest gains, trading up 11% on its first day and 7% in the aftermarket. The company originally planned to raise $60 million at a $207 million market cap in September 2012, but postponed its IPO and withdrew in October 2013. This time, the company went public only after slashing its IPO price 38% and reducing shares, resulting in an IPO that raised $15 million and initially valued the company at a $52 million market cap. The immunotherapy biotech stimulates white blood cell creation instead of antibodies, and is in Phase 2 trials for hepatitis B and pancreatic cancer. Minerva Neurosciences (NASDAQ:NERV), which is developing treatments for symptoms of schizophrenia and insomnia, cut its price by 45% from the midpoint and traded up 2%. Its possible that investors could decide that these "bargain biotechs" offer an attractive risk/reward opportunity, as the eleven other biotechs discounted over 25% this year have gained an average of 36%.

Investar (NASDAQ:ISTR), which operates ten banks in southern Louisiana, became the year's sixth (and smallest) bank to go public, and the latest to face investor pushback. The company priced below its range and finished the week trading just above its IPO price. Financial companies were the second quarter's worst-performing sector, dragged down by negative returns from banks in particular.

Read Renaissance Capital's 2Q14 US IPO Market Review to find our analysis of the busiest quarter for IPOs in 14 years (83 companies raised $21 billion), including what to expect in the third quarter.

IPO pricings (week of June 30, 2014)
Company (Ticker) Business Deal Size ($mm) IPO Price vs. Midpoint Return as of 7/4
GlobeImmune (GBIM) Biotech: Hepatitis B and pancreatic cancer $15 -38% 19%
Minerva Neurosciences (NERV) Biotech: Treatments for CNS disorders $33 -45% 2%
Investar Holding (ISTR) Louisiana bank with ten branches $40 -13% 0%

IPO market snapshot

So far this year, 148 IPOs have raised $31.5 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 5% compared with 7% for the S&P 500. Over the last 30 days, the IPO ETF has risen 5% compared with 2% for the S&P 500, as the IPO market's recovery outpaces steady gains in the broader market. The active IPO pipeline now includes 141 companies looking to raise a total of $52.4 billion.

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