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).
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