U.S. IPO Weekly Recap: Two Deals Flounder While One Soars

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Includes: BL, CRSP, FRTA, GDS, GOLF-OLD, IRTC, MYOV, QTNA, RARX, SNES
by: Renaissance Capital IPO Research

Three IPOs raised $495 million this week, led by iRhythm Technologies (Pending:IRTC), which popped 53% on its first day. The other two IPOs, CRISPR Therapeutics (NASDAQ:CRSP) and Forterra (Pending:FRTA), priced below the range and closed the week down 1% and 6%, respectively. Forterra's 8% drop on its first day was the eighth worst first day of 2016.

October has seen 13 IPOs, which makes it the third busiest month for IPOs in 2016, but to get done, eight priced below the range, and eight companies closed Friday below their IPO price. Just 39% of October IPOs are trading above issue, and the average October IPO is up just 7%, compared to the average 2016 IPO which is up 29%.

IPO Pricings Week of October 17th, 2016
Issuer
Business
Deal Size
($mm)
Market Cap
($mm)
Price vs.
midpoint
First day
return
Return
at 10/21
Forterra $332 $1,157 -10% -8.3% -5.6%
Leading drainage and potable water pipe company in the US and Eastern Canada.
iRhythm Technologies $107 $396 +21% +53.2% +51.7%
Provides a device and analysis for detecting cardiac arrhythmias.
CRISPR Therapeutics $56 $573 -12.5% +0.6% -1.3%
Preclinical biotech developing therapies based on CRISPR/Cas9 gene editing.
Click to enlarge

Forterra - Since it was acquired by Lone Star from HeidelbergCement in 2015, Forterra has focused its business on drainage and potable water infrastructure and acquired six companies (totaling $1.2 billion), which have helped it increase its product breadth and geographic reach. While the acquisitions have helped it become a leader in the $10+ billion water infrastructure market with 30-50% share, Forterra faces risks due to the cyclicality of the industry and its high, floating rate debt load of 4.7x PF LTM EBITDA. Investors required a deeper discount to complete the deal, which priced 10% below its midpoint and fell 8% on its debut.

iRhythm Technologies - This venture-backed medical device maker attracted strong investor demand, pricing 21% above its midpoint and popping 53% on its debut. The company has an attractive growth profile, with revenue growth accelerating to 79% in the 1H16 from 66% in 2015. Its device appears to provide superior diagnosis abilities for cardiac arrhythmias relative to competitors, which should continue to drive its growth in its $1.4 billion target market.

CRISPR Therapeutics - This gene-editing biotech was the third of its kind this year, joining peers Editas Medicine and Intellia Therapeutics in the public market. While the CRISPR/Cas9 technology has massive potential to treat thousands of diseases, all three companies are still very early stage, with human testing yet to begin. Editas and Intellia were both high-flyers earlier this year, but they now trade below their respective IPO prices, which, along with uncertainty in the ongoing IP interference proceedings, may have led to decreased interest for CRISPR.

IPO Pipeline Update
Eight companies launched their deals this week: Golf equipment and apparel maker Acushnet Holdings (GOLF-OLD), Chinese data center services provider GDS Holdings (Pending:GDS), endocrine disorders biotech Myovant Sciences (Pending:MYOV), medical-use cannabis facilities REIT Innovative Industrial Properties (NYSE:IIPR), cloud-based financial reporting software provider BlackLine (Pending:BL), Wi-Fi chip designer Quantenna Communications (Pending:QTNA), rare disorder-focused biotech Ra Pharmaceuticals (Pending:RARX) and chemical rodent control company SenesTech (Pending:SNES).
One company submitted a filing this week: micro-cap biotech CollPlant (Pending:CLGN)

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index gained 2.1% this past week compared to the S&P's +0.4%, though the IPO Index's year-to-date gain of 0.5% still trails the S&P's 5%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (NYSE:BABA) and Citizens Financial Group (NYSE:CFG). The Renaissance International IPO Index is down 2% year-to-date, while ACWX is up 4%. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include NN Group and Cheil Industries.