Positive Week for U.S. IPO Market

by: Renaissance Capital IPO Research

The US IPO market flourished this week with six companies completing their deals and posting an average return of 31% by Friday's market close. Small cap growth stories and US-listed Chinese ADRs continued to take the spotlight with quilted handbag designer Vera Bradley (NASDAQ:VRA) and China-based tutoring service provider Tal Education Group (XRS) ending the week up 68% and 65%, respectively, from their listing price.

Vera Bradley (VRA) raised $176 million on Wednesday after pricing its deal at the high end of its proposed $14-$16 range. The handbag designer's impressive margins and aggressive growth strategy, which targets up to 20 new store openings per year, likely contributed to strong deal demand. Italian restaurant chain Bravo Brio Restaurant Group (NASDAQ:BBRG), another retail IPO, raised $140 million after selling an upsized deal at $14 per share. The upscale affordable chain is also preparing for growth and plans to open 45 to 50 new restaurants over the next five years. The stock jumped 14% in its debut and climbed an additional 6% by the end of the week.

TAL Education Group (XRS)
, one of China's leading after-school tutoring service providers for K-12 students, raised $120 million in its IPO and expects to use proceeds for expansion. Chinese education companies have been notably active in the US IPO market with Global Education and Technology Group (NASDAQ:GEDU) completing a $67 million IPO earlier this month and Xueda Education Group (NYSE:XUE) announcing terms for its upcoming $111 million IPO on Wednesday. Though many Chinese ADRs have performed strongly over the past month, IPO investor interest has not been indiscriminate: ShangPharma Corporation (NYSE:SHP) saw its stock fall 7% by the end of the week after raising $87 million and was the only IPO to end the week in negative territory.

NetSpend (NASDAQ:NTSP), which offers reloadable prepaid debit cards and related financial services, priced its IPO at the midpoint of the range and raised $204 million. Buzz surrounding the prepaid debit card industry has been fueled by competitor Green Dot's (NYSE:GDOT) successful $164 million IPO in July. Early stage biotech Aegerion Pharmaceuticals (AEGR) slashed the deal size for its IPO by 47% in a post effective amendment on Friday morning before listing on the NASDAQ later in the day. Aegerion, which is developing a drug for an orphan disease that produces fatal levels of cholesterol, raised $48 million by offering 5 million shares at $9.50 after originally planning to offer 4.7 million shares at a range of $14-$16. The biotech, which has yet to generate product revenue, climbed a surprising 14% by the end of the day.

The US IPO market is expected to sustain high levels of activity with six more deals scheduled on the IPO calendar for next week. The group spans a wide range of industries and includes Chinese retail website operator Mecox Lane (NASDAQ:MCOX), real-time DNA sequencing system developer Pacific Biosciences of California (NASDAQ:PACB) and independent medical exam provider ExamWorks Group (NYSE:EXAM).