Pricing pressure continued this week as only one company was able to price in or above its range.
Five IPOs raised $1.2 billion this week, including one of the most highly-anticipated IPOs of 2015. However, it was a global print packaging manufacturer that had the best IPO. Two biotechs and a REIT specializing in farmland went public this week as well. One company failed to price for the second week in a row, and six more filed, increasing the total to 30 filings in October.
Ferrari in pole position
Considered a bellwether for the fall IPO market, Ferrari raised $893 million Tuesday in one of the most highly-anticipated IPOs of the year. It priced 17.2 million shares 4% above the midpoint at $52, then opened at $60. It was announced on Friday that Ferrari's underwriters had exercised in full the option to buy additional shares, increasing the total IPO size to 18.9 million shares, for total gross proceeds of $982 million. The company has one of the world's strongest brands, marketing the name through a storied racing legacy and cars that have attained almost legendary status. Manchester United, which has similarly intense brand support, is up 29% from its 2012 IPO price despite falling far short of expectations on earnings. Ferrari ended the week at $56.38, a gain of 8%.
The complete package
Multi Packaging Solutions had the best IPO of the week, popping 22% in its debut. In fact, the global print-based specialty packaging company had the best first day of all companies outside of the health care sector in the last three months. However, to get the deal done, the company priced shares 19% below the range at $13, and private equity backers Madison Dearborn and the Carlyle Group opted out of selling their shares on the offering. It did offer 3 million additional shares for a total of 16.5 million, so net proceeds were essentially the same (~$180 million). The company traded flat after the first day, closing Friday up 22%.
Biotechs are going to the dogs
Although it priced below the range, Dimension Therapeutics evidently did not price low enough as shares fell 17% on its first day. The company raised $72 million, coming to market at $13, 13% below the midpoint but 38% above its last private round ($9.41 per share). Despite decades of research on viral delivery gene therapies at the University of Pennsylvania, the market opportunity for lead product candidate DTX101 remains unclear as no gene therapies have been approved in the US.
Oasmia Pharmaceutical, which is developing formulations of widely-used cancer drugs for humans and dogs, finally priced its IPO. It amended its filing on September 15, targeting a mid-September IPO, only to push it back and amend its filing multiple times before pricing at $4.06, 40% below its midpoint, raising just $9 million. Including Dimension and Oasmia, the last 13 health care IPOs have averaged a total return of just 0.4%, with 10 pricing below the range.
Sell the farm
American Farmland Company, a REIT with a focus on farmland in California, Illinois and Florida, raised $48 million by offering 6 million shares at $8. The company originally planned to offer 12 million shares at a range of $8.50 to $10.50, but it decreased its proposed deal size by 58% to get the deal done. It fell 13% in its debut, recovering slightly to end the week down 6%.
Adesto Technologies (NASDAQ:IOTS) failed to price for the second week in a row. The company, a fabless provider of flash memory chips for Internet of Things devices, is currently listed as day-to-day and hopes to raise $42 million.
|5 IPOs during the week of October 19, 2015|
|Company (Ticker)||Business||Deal size ($mm)||IPO price vs. midpoint||1st-day pop||Return at 10/23|
|Multi Packaging Solutions (NYSE:MPSX)||Paper packaging manufacturer||$215||-19%||22%||22%|
|Ferrari (NYSE:RACE)||Luxury sports car manufactuer||$893||4%||6%||8%|
|Oasmia Pharmaceutical (NASDAQ:OASM)||Biotech: cancer drugs for dogs and humans||$9||-40%||-4%||-4%|
|Dimension Therapeutics (NASDAQ:DMTX)||Biotech: gene therapy for rare liver diseases||$72||-13%||-17%||-6%|
|American Farmland Company (AFCO)||REIT with farmland in CA, FL, and IL||$48||-16%||-13%||-6%|
IPO Market Snapshot
$28 billion has been raised so far in 2015, but just 37% of 2015 IPOs are trading above issue. An average first day pop of 15% has fallen to average returns of -5%. The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 7% year-to-date, compared to 1% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (NYSE:BABA), Twitter (NYSE:TWTR) and Hilton Worldwide (NYSE:HLT). The Renaissance International IPO Index is down 1% year-to-date, compared to -1% for the ACWX. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Recruit Holdings and Samsung C+T.