U.S. IPO Recap: 2013 Breaks Past 2012's IPO Totals In Pricings And Filings

by: Renaissance Capital IPO Research

Five pricings pushed 2013 ahead of 2012's full-year US IPO total last week. The year's 130 US IPOs (vs. 128 in all of 2012) are the second-most through August since 2000. At the same time, with nine new filers, 2013 also surpassed 2012's full-year total for initial filings (148 vs. 141). In last week's largest deal (and the fourth largest of the 2013), Envision Healthcare (NYSE:EVHC) raised $966 million and gained 12%. The new filers mostly consisted of clinical-stage biotechs and online technology companies, including Chegg (NYSE:CHGG), a leading textbook rental service.

Chinese microcredit lender jumps 58%

After twice cutting its deal size, China Commercial Credit (NASDAQ:CCCR) saw high volatility in its first week of trading, but ended up as the best performing IPO of the week. The microcredit company, which offers short-term loans in the Jiangsu Province of China, raised only half of its initially proposed $18 million deal size and fell 2% on its first day of trading on Tuesday. However, it then doubled in price to $14 on Thursday, before falling sharply on Friday to $10.27, 58% above its offer price.

Another small financial company, Independence Realty Trust (NYSEMKT:IRT), also raised less funds than expected and dropped 2% from its IPO price. Managed by RAIT Financial Trust (NYSE:RAS), the apartment owner will need to make acquisitions to cover its proposed dividend. Despite widespread success for biotech IPOs in 2013 (23 completed; 48% average return), Sophiris Bio (NASDAQ:SPHS) had to cut its price from $13 to $5 to complete its deal. The biotech, which is developing a treatment for BPH and was already listed in Toronto, was the worst-performing deal of the week, falling 17%. The remaining IPOs had relatively modest debuts, rising less than 10% on their first days. Third Point Reinsurance (NYSE:TPRE) (+6%) is a property and casualty reinsurer managed by Daniel Loeb's hedge fund, Third Point. Envision Healthcare (EVHC; +12%) is a top provider of outsourced medical and ambulance services and was taken private for $3.2 billion in 2011 by private equity firm Clayton, Dubilier & Rice.

IPO pricings (week of August 12, 2013)
Business Deal Size ($mm) Price vs. Midpoint Return
China Commercial Credit Microcredit in China $9 0% 58%
Envision Healthcare Outsourced medical services $966 7% 12%
Third Point Reinsurance Property and casualty reinsurer $276 -7% 4%
Independence Realty Trust Apartment REIT $34 -19% -2%
Sophiris Bio Urological disease biotech $65 -62% -17%

IPO pipeline builds as nine companies submit initial filings

Nine companies submitted initial filings last week, the most in one week since June. QTS Realty Trust (NYSE:QTS), a data center operator and former Private Company Watchlist member, filed with the largest proposed deal size last week. The company is one of the biggest and fastest-growing data center providers in the United States and is looking to raise up to $300 million. Springleaf Holdings (SPLH), a leading consumer finance company that provides loan products through its branch network and online, also filed for what is expected to be a sizable deal. The company used a placeholder of $50 million in its initial filing, but we expect the deal size to be much larger. Springleaf originally filed for a $500 million IPO in 2011 under the name Springleaf REIT.

Three of last week’s initial filings came from biotech companies hoping to take advantage of the hot market for biotech IPOs. BIND Therapeutics (NASDAQ:BIND), which is looking to raise $81 million, develops novel therapeutics called Accurins, which target specific cells or tissues so as to enhance efficacy while minimizing adverse effects on healthy tissues. BIND has entered into collaboration agreements with Amgen (NASDAQ:AMGN), Pfizer (NYSE:PFE) and AstraZeneca (NYSE:AZN) to develop Accurins for therapeutics in their pipelines. Fate Therapeutics (NASDAQ:FATE), a clinical-stage biotech developing stem cell treatments for orphan diseases, and Ophthotech (OPTH), which is developing novel therapeutics for eye diseases, also joined the IPO pipeline last week.

Last week’s initial filers also included four technology companies. Despite disappointing returns from recent ad tech IPOs YuMe (NYSE:YUME) (-1%) and Tremor Video (TRMR) (-33%), Rocket Fuel (NASDAQ:FUEL), another ad tech company, filed for a $100 million deal. The company claims that its Artificial Intelligence system, which autonomously purchases ad spots on digital advertising exchanges in order to most effectively reach clients' target audiences, differentiates it from its competitors. Chegg, a leading online education platform that is most known for its textbook rental service, filed for a $150 million deal. Benefitfocus (NASDAQ:BNFT), which provides a cloud-based platform for benefit enrollment and management, joined the growing group of SaaS companies in the IPO pipeline with its $75 million initial filing. The company’s filing follows the successful IPO of event management SaaS provider, Cvent (NYSE:CVT), which traded up almost 57% in its market debut last week. Applied Optoelectronics (NASDAQ:AAOI) was the smallest tech deal to file last week; the fiber-optic networking products manufacturer hopes to raise $50 million in its IPO.

New IPO filers (week of August 12, 2013)
Company Business Deal Size ($mm) LTM Sales ($mm)
QTS Realty Trust Data center operator $300 $159
Chegg Online education platform $150 $238
Rocket Fuel Ad tech $100 $160
Ophthotech Eye disease biotech $85 $0
BIND Therapeutics Targeted therapeutics $81 $2
Benefitfocus Benefit management SaaS $75 $91
Fate Therapeutics Orphan disease biotech $69 $2
Springleaf Holdings Consumer finance $50 $859
Applied Optoelectronics Fiber-optic products $50 $69

IPO market snapshot

The 130 IPOs in 2013 have raised $28.4 billion and produced an average return of 29%. There have been 64 IPOs in the past 90 days, with total proceeds of $12.5 billion and an average return of 29%. The active IPO pipeline includes 98 companies looking to raise $29.6 billion.