Momentum in U.S. IPO Market Continues to Build

by: Renaissance Capital IPO Research

The US IPO market continued to experience accelerated levels of activity last week, with six companies coming to market and eight more, including high-profile General Motors (NYSE:GM), revealing terms for their upcoming deals.

Performance varied widely with four out of the six IPOs posting double-digit returns by the end of the week, while Greek shipping company Costamare (NYSE:CMRE) and China-based oil company SinoTech Energy (NASDAQ:CTE) fell -1% and -26%, respectively. Chinese tutoring company Xueda Education Group (NYSE:XUE) started the week with a successful debut, raising $128 million on Monday after pricing its deal at $9.50, 15% above the midpoint of the original range. The latest of multiple Chinese education companies to list in the US recently, which TAL Education (NYSE:TAL), Ambo Education (NYSE:AMBO) and Global Education and Technology (NASDAQ:GEDU), Xueda jumped 32% on its first day of trading as the company's strong organic growth and backing from Warburg Pincus attracted IPO investors.

Though Xueda's IPO impressed, retail IPOs SodaStream International (NASDAQ:SODA) and The Fresh Market (NASDAQ:TFM) emerged as the best performers of this week's crop. Israel-based SodaStream, which manufactures a system that allows customers to make their own soda and sparkling water, priced its upsized offering at the high end of its $18-$20 range, raising $109 million. With its Western European markets reaching maturity, SodaStream recently launched a massive rollout in the US and now sells its unique product at major retailers such as Bed Bath & Beyond (NASDAQ:BBBY), Macy's (NYSE:M) and Crate & Barrel. The stock jumped 21% in its debut and is currently trading over 50% above its IPO price. Specialty grocer The Fresh Market (TFM) was also well-received, raising $290 million after pricing its deal at $22, above the $18-$20 range. The North Carolina-based retailer, which operates 100 locations, has grown its store base at a 15% CAGR since 2005 and could support up to 500 locations in the long term. The Fresh Market listed on the NASDAQ on Friday and soared 47% to over $30 by mid-afternoon.

Primo Water Corporation (NASDAQ:PRMW), which sells water dispensers are multi-gallon bottles at over 7,000 retail locations, also began trading on Friday after pricing its $100 million at the midpoint of its $11-$13 range. Though Primo similarly addresses a large and growing market opportunity, the company is still small with a market cap of roughly $250 million and has yet to turn an operating profit; the stock posted more moderate returns of roughly 11% after listing on the NASDAQ.

Momentum in the US IPO market continues to build with eight companies having announced terms for their upcoming deals so far this week, including General Motors (GM), which expects to raise $10 billion. Other high-profile IPOs include consulting giant Booz Allen Hamilton (NYSE:BAH), financial technology platform operator LPL Investment (NASDAQ:LPLA) and casino operator Caesars Entertainment (NASDAQ:CZR), which originally filed with the SEC under Harrah's Entertainment. There are eight deals scheduled on the US IPO calendar for next week.