Last week's lone US IPO, Hi-Crush Partners (HCLP), followed a familiar path on its way to a 15% gain. The frac sands producer, which is structured as an MLP and offers investors a roughly 10% dividend yield, raised $191 million on Wednesday and became the fourth consecutive U.S. IPO to price below the range. Including Hi-Crush, eleven of the past twelve IPOs have priced below the originally proposed midpoint, and all but three have produced positive returns (9% on average).
As we noted last week, investors have been aggressive in seeking discounts for economically sensitive companies, and Hi-Crush-- with its exposure to oil and natural gas prices-- was no exception. Aided by more attractive pricing levels and a rising equity market, aftermarket returns have trended favorably, and August's seven deals have produced an average aftermarket return of 3%. In the three months since Facebook (FB), the average IPO has gained 18%, including a 5% average aftermarket gain.
Carveouts fill up the pipeline
While pricing activity slowed, filings activity reached a one-month high as six deals were added to the pipeline, potentially raising upwards up of $5 billion. The largest were Pfizer's (PFE) animal health unit, Zoetis (ZOET.RC), which is expected to raise $2 billion or more, and Grupo Financiero Santander Mexico (BSMX), which filed late Friday. Reports indicate that it could raise $4 billion in a dual listing (US-Mexico). Blyth-owned ViSalus (VSLS.RC), a direct marketer of nutritional supplements, filed to raise $175 million on Friday. Zoetis are ViSalus are two of six carveouts to file in August as larger companies seek to unlock value.
A previously confidential filer, online real estate listings company Trulia (TRLA), made its first public submission, seeking $75 million. Trulia bears a strong resemblance to Zillow (Z), one of 2011's top US IPOs (up 85%). Also filing were waste management services provider Safety-Kleen (SK), which is now seeking $400 million after attempting to go public in 2008, and biotech Regulus Therapeutics (RGLS), which hopes to raise $58 million.
Social media IPOs turn a cold shoulder
The weak performance of Manchester United (MANU) and Facebook marked a difficult week for high-profile IPOs. Manchester United, which raised $233 million on August 9 and finished flat in its trading debut, closed below its offer price for the first time on Thursday and ended the week down 4%. Facebook hit a new post-IPO low on Friday, following its first material lockup release. Its 50% decline makes it the second-worst performing IPO of 2012. Other social media giants have also been battered: Groupon (GRPN), a $700 million November 2011 IPO, reached its own post-IPO low (down 76%) last week after reporting a continued slowdown in growth on Monday; Zynga (ZNGA), a $1 billion December 2011 IPO, has dropped 40% since slashing its guidance in late July and is now 70% below its offer price.
While the dismal performance of Facebook, Groupon and Zynga has dealt a huge blow to investor sentiment, not all social media IPOs have disappointed. Both LinkedIn (LNKD; up 124%; May 2011 IPO) and Yelp (YELP; up 34%; March 2012 IPO) have delivered strong gains. A key to their success so far has been accelerating (and sustained growth) at the time of and following their IPOs. Groupon and Facebook both reported decelerating growth in the quarter before going public (and have continued to do so), while Zynga's growth was largely hit-driven.
Disclosure: No position