U.S. IPO Weekly Recap: No IPOs In Final Week Of A Challenging February

|
Includes: AJX, CHEK, CPPL, INOV, NVTA, RCKT
by: Renaissance Capital IPO Research

There were no initial public offerings in the past week, but recent IPO performance continues to trend up. The 24 IPOs in 2015 now average +18%, including +5% after the first day, its highest point this year.

A few highlights from February 2015:

10 IPOs priced in February, down from 20 in 2014

• These returned 7.5% on average; none have gained over 21%

6 IPOs postponed in February, up from 1 last year

• Year's two largest US IPOs: Inovalon ($600mm) and Columbia Pipeline LP ($1.1 billion)

Health care: popular sector has pushback

Five health care companies went public in February and five more postponed their IPOs. Of the five, only genetic test provider Invitae (NYSE:NVTA) has gained more than 2%. Two companies (CHEKU) (ITEK) received a greater valuation cut that 95% of 2014 IPOs and proceeded to trade flat. Bellerophon (NASDAQ:BLPH) had the worst first-day performance for a biotech (-25%) in over 10 years and Nexvet (NASDAQ:NVET) didn't do much better (-11%), but both have since climbed up to the IPO price. Don't expect the poor performance of these IPOs to dry up the pipeline; new health care companies continue to submit initial filings.

Three yield deals: Pipelines outperform

With energy stocks in the tank, REITs could replace MLPs as the 2015 IPO dividend play. We could also see a shift from MLPs with oil and gas collection assets to those with storage and long-distance transportation assets (NYSE:CPPL), (PESL), (BATS:PESC) or GPs with their distribution rights (NYSE:EQGP), (TEGP).

Columbia Pipeline Partners LP (LP) was the best-performing February IPO, up 20% from its offer price, and the year's first to raise over $1 billion. Transportation assets are still necessary even with depressed oil and gas prices. Government property REIT Easterly (NYSE:DEA) saw a moderate gain while sub-performing mortgage REIT Great Ajax (NYSE:AJX) has had sub-par performance, down 1%.

A tech stock with aftermarket performance?

Inovalon (NASDAQ:INOV), February's only tech IPO, priced above the range and ended its first day flat. It has since traded up 15%, providing retail investors with the chance to capture all of its gains.

February 2015 IPOs
Company (Ticker) Business Deal Size ($mm) IPO Price vs. Midpoint First-Day Pop Return as of 2/27
Columbia Pipeline Partners LP (CPPL) Gas pipelines and storage $1,077 15% 17% 20%
Invitae (NVTA) Suite of genetic tests $102 14% 7% 17%
Inovalon (INOV) Health care data platform $600 20% 0% 15%
Avenue Financial Holdings (AVNU) Nashville bank $28 -8% 8% 14%
Easterly Government Properties (DEA) REIT with government-leased offices $180 0% 3% 7%
Check-Cap (CHEKU) Ingestible cancer detection $12 -45% 0% 1%
Inotek (ITEK) Biotech: glaucoma $40 -57% 0% 0%
Nexvet Biopharma (NVET) Biotech: cat and dog pain $40 -31% -11% 0%
Bellerophon Therapeutics (BLPH) Biotech: pulmonary/cardiac disease $60 -21% -25% 0%
Great Ajax (AJX) Mortgage REIT $71 -11% -2% -1%

IPO market snapshot

The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, has traded up nearly 6% year-to-date, close to its all-time high. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Twitter (NYSE:TWTR), Zoetis (NYSE:ZTS), Alibaba (NYSE:BABA), Hilton (NYSE:HLT) and Ally Financial (NYSE:ALLY).

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.