IPO Market Heats Up With 4 Mid-Summer Deals, 11 On The Calendar

by: Renaissance Capital IPO Research

The IPO market exhibited strong signs of life this week when four companies were able to price, with three doing so above their initial ranges. Additionally, all four companies are trading above their offer prices, a positive trend given pricing pressures experienced by offerings in the first half of this year. This week's strong returns have also helped breathe new life into the entire IPO market, as average aftermarket returns turned positive year-to-date.

Highly anticipated IPOs, firewall software provider Palo Alto Networks (NYSE:PANW) and travel website operator KAYAK (NASDAQ:KYAK), which priced Thursday after the close, produced first day returns of 27% and 28% respectively. However, the highest first day returns this week belong to high-growth discount retailer, Five Below, which returned 56% in its opening trading on Thursday and gained an additional 3% on Friday. Biotech Durata Therapeutics (NASDAQ:DRTX), which priced below its initial range, closed up 6% from its offer price of $9.

This week's IPO performance reflects investor preference for high-growth business models, particularly in the consumer and tech sectors. The only company not to get its IPO offering completed, iconic guitar brand Fender Musical Instruments (FNDR), had the lowest growth prospects among this week's deals in addition to a premium valuation.

Additionally, the performance should bode well for a score of upcoming IPOs, including eight set to price next week and an additional three that have set terms for the following week. Some notable companies include Mexican restaurant chain Chuy's Holdings (NASDAQ:CHUY), organic grocer Natural Grocers (NYSE:NGVC) and enterprise software company E2open (NASDAQ:EOPN).