U.S. IPO Weekly Recap: Stock Exchange BATS Flies Up 21% In The Year's Largest IPO

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Includes: ARA, BATS, EDIT, GMS, MGP, MHED, MSBI, NTLA, NTNX, PSAV, RRR, SCWX, USFD
by: Renaissance Capital IPO Research

The US IPO market shifted into gear this week with Bats Global Markets' (BATS:BATS) public debut. Its positive initial reception serves as an encouraging sign for IPOs on the calendar and pipeline.

Bats' significance is highlighted as the year's:

  • First non-healthcare IPO
  • Largest IPO by deal size ($253 million) and market cap ($1.85 billion)
  • Best first-day pop (+21%)
  • First of seven attempted IPOs with operating income to complete an IPO

Bats Global Markets raised $253 million, 25% more than anticipated, by pricing an upsized offering at $19, the high end of the range. Four years after a trading glitch disrupted its first IPO attempt, the company became the first corporate listing on its own Bats BZX Exchange. A market leader with the #2 position in US equities and #1 in Europe, Bats boasts both profitability (6% net margin) and growth (+12% organic rate).

The uptick in IPO activity coincides with improving market conditions. The Renaissance US IPO Index traded up 3.4% this past week, while S&P 500 gained 1.6%. The VIX Volatility Index has remained below 20 for most of the past two months, and below 15 for most of the past month.

Securities exchange Bats could turn the tide for US IPOs
Company Business Deal size ($mm) IPO price vs. midpoint Friday debut
Bats Global Markets Low-cost securities exchange. $253 +6% +21%
Click to enlarge

Three new filings: A large LBO, a cutting-edge biotech and a regional bank
Three companies joined the US IPO pipeline this past week, bringing April's filing count up to eight, representing the most activity since early January. Oaktree Capital's food manufacturer AdvancePierre Foods (APFH.RC) filed for an IPO that we estimate could raise $500 million. On the heels of a new partnership with Regeneron, Intellia Therapeutics (NASDAQ:NTLA) filed to raise $120 million; it is one of three CRISPR gene editing biotechs alongside recent IPO Editas Medicine ((NASDAQ:EDIT); +150%) and CRISPR Therapeutics (CRSP.RC). Last, Illinois-based Midland States Bancorp (MSBI), a bank with $2.9 billion in assets, filed to raise $120 million.

The week ahead could raise $1.3 billion
Three deals are on the IPO calendar to raise nearly $1.3 billion in the week ahead, including Las Vegas REIT MGM Growth Properties LLC ((NYSE:MGP); $975mm deal size), LBO'd dialysis clinic operator American Renal ((NYSE:ARA); $161mm) and cybersecurity services provider SecureWorks ((NASDAQ:SCWX); $149mm). LBO'd casino company Red Rock Resorts (NYSE:RRR) launched on Friday to raise $531 million in the following week.

Look out for these potential launches
Now that IPO activity is picking up, we believe some of the most likely IPO launches include: Atkore International (Pending:ATKR), Nutanix (NASDAQ:NTNX), Gypsum Management (NYSE:GMS), US Foods (NYSE:USFD), McGraw-Hill Education (Pending:MHED), PSAV (Pending:PSAV) and Tactile Systems (Pending:TCMD).

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 5% year-to-date. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (NYSE:BABA), Synchrony Financial (NYSE:SYF) and Citizens Financial Group (NYSE:CFG). The Renaissance International IPO Index is down 4% year-to-date, compared to -2% for ACWX. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include NN Group and Aena S.A.