U.S. IPO Weekly Recap: 3 Profitable Companies Deliver Double-Digit Returns

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Includes: BOLD, IRSH, NBLX, PI, PTHN, TLND, TPIC
by: Renaissance Capital IPO Research

Three profitable companies each traded up more than 20% this past week, while the sole biotech IPO ended flat. Radio-frequency chip maker Impinj, the week's smallest IPO, delivered the largest return (+40%). For 2016 IPOs, first-day returns (+9.0%) have now eclipsed aftermarket returns (+8.8%), with the average IPO up 19%. None of the past 10 offerings have ended their first day below issue.

Impinj impresses: Chip maker up 40%
Impinj (NASDAQ:PI) raised $67 million by offering additional shares at the high end of the range and surged 28% on its first day, finishing the week up 40%. Backed by ARCH Venture, Polaris and Madrona, it is a fast-growing (+35% in the MRQ) and leading manufacturer of RFID tags (65% market share) and readers (61%), a potentially multi-billion dollar market.

More green shoots for the tech sector
Despite a massive backlog of pre-IPO tech companies, the sector had been notably missing from the IPO market in much of the past year. Yet in the past month, tech IPOs represented 33% of deal flow (3 of 9), and one more, Talend (NASDAQ:TLND), is on the IPO calendar for the week ahead. Including Impinj, the last 11 tech IPOs each trade above issue, with an average return of 56%. An opening of the tech window is key to driving IPO volumes in the rest of 2016, and the sector's strong returns should serve as an encouraging sign.

Not a tough pill to swallow: Patheon jumps 21%.
Patheon (Pending:PTHN) raised $625 million in the year's fourth-largest IPO. It is one of the world's largest providers of contract drug manufacturing and development. While the LBO still has a large debt burden after the IPO ($2.2 billion; 5.9x LTM adj. EBITDA), the company boasts strong cash flow conversion and a leading position in a $40 billion industry growing at a CAGR of 7-8%. We also note that 2016 IPOs that have raised over $100 million have significantly outperformed.

Cut and run up: Wind blade maker slashes price and gains 23%
TPI Composites (NASDAQ:TPIC) priced 31% below its proposed midpoint - the year's largest price cut for a non-biotech - to raise $69 million. During the week, TPI disclosed that one of its wind blades had recently failed, and the company added insider buying (20% of the deal) from its PE backers. While the profitable company had secured several major contracts in recent years, customer concentration is still high and government subsidies remain up in the air.

Audentes Therapeutics (Pending:BOLD) raised $75 million at a market cap of $341 million by pricing at the $15 midpoint, where it also finished Friday. While fellow gene therapy biotech AveXis (NASDAQ:AVXS) is up 97% from its February IPO, Audentes was even earlier stage: all of its candidates are preclinical. Backed by OrbiMed and other leading VCs, insiders had agreed to purchase up to 40% of the IPO, but ended up buying 22%.

IPO Pricings Week of July 18th, 2016
Issuer
Business
Deal Size
($mm)
Market Cap
($mm)
Price vs.
midpoint
First-day
return
Return
at 7/22
Impinj $67 $269 +8% +28% +40%
Leading provider of radio-frequency identification tags and reader chips.
TPI Composites $69 $369 -31% +23% +23%
Manufacturer of composite blades used in wind turbines.
Patheon $625 $3,034 +2% +19% +21%
Global provider of contract drug manufacturing and development services.
Audentes Therapeutics $75 $341 0% +1% 0%
Preclinical biotech developing gene therapies for rare diseases.
Click to enlarge

IPO Pipeline Update
Only one company submitted an initial filing this past week, property and casualty insurer Ironshore (Pending:IRSH), which we estimate could raise $500 million. Signaling plans to move forward with an IPO, Tabula Rasa HealthCare (Pending:TRHC) updated its financials this past week, while Noble Midstream Partners LP (NYSE:NBLX) and Motif Bio (MBIO) updated their filings. Filing activity is likely reduced due to the upcoming annual pause in the IPO market in August.

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 3% year-to-date, while the S&P 500 up 6%. 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 7% year-to-date (as of Thursday's close), compared to ACWX, which is up 1% (also as of Thursday). Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Recruit Holdings, NN Group and Aena S.A.