Week Ahead: IPO Market Ready For Subprime Time

by: Renaissance Capital IPO Research

After an initial stutter, the IPO market is again set to see the first IPO of the year as fast-growing online lender Elevate Credit seeks a public listing.

Subprime time

Sequoia Capital and TCV-backed Elevate Credit (NYSE:ELVT) is set to raise $76 million at a market cap of $708 million. Since launching its current products in 2013, Elevate has provided $1.2 billion in credit to over 450,000 customers with an average loan balance of $1,472. IPO investors will grapple with the question of whether Elevate's rapid growth (+67% in the 9 months of 2015) will be enough to offset a souring of the non-prime space; peers OnDeck Capital (NYSE:ONDK) and LendingClub (NYSE:LC) have sold off 25-30% this year alone after shedding more than 55% in 2015.

Investors lay the caution tape

California construction company Shimmick Construction (NASDAQ:SCCI) failed to price its $75 million IPO (33% insider) this past Thursday, and deal timing is set as day to day. Shimmick believes it is at the precipice of an expansionary cycle in public construction spending, but broader market concerns and peer company selloffs may have spooked investors.

The S&P 500 fell another 2% this past week, and the VIX Volatility Index finished the week back above 25. Recent IPOs have not been spared from the broader market selloff: 90-day total returns are in negative territory (-0.6%) for the first time since October 2015. The week's two potential IPOs face headwinds from equity markets broadly and the especially poor performance of construction services companies and online and subprime lenders.

IPO Calendar
Deal Size($m)
Market Cap($m)
Price Range
Shares Filed
Top 2
Shimmick Construction Company
Oakland, CA
$11.00 - 13.00
FBR Capital
Provides heavy civil construction services to public agencies in California.
Elevate Credit
Fort Worth, TX
$20.00 - 22.00
UBS Investment
Provider of loans and lines of credits to non-prime consumers.

IPO Pipeline Update: Four companies set terms, three submit initial filings

Founder-led fleet services provider AmeriQuest (AMQ) could be the first tech IPO of 2016; it has set terms to raise $76 million. Newly organized REIT Nordic Realty Trust (NASDAQ:NORT) set terms this past week to raise $75 million. Delayed-release aspirin developer PLx Pharma (NASDAQ:PLXP) set terms to raise $68 million. Biotechs Oncobiologics (NASDAQ:ONS) and AveXis (NASDAQ:AVXS) both filed to raise $115 million. Long-term implantable glucose monitor producer Senseonics (SENH) filed to raise $52 million.

Fasten your seatbelts

Last Monday's wave of biotech filings become eligible to launch their IPO road shows on Tuesday, with an aggregate deal size of $668 million. These potential launches include immunotherapy biotech Corvus Pharmaceuticals (NASDAQ:CRVS), which could raise $115 million, and CRISPR gene editing biotech Editas Medicine (NASDAQ:EDIT), with a deal size of $100 million.

IPO Market Snapshot

In 2015, 170 companies raised $30 billion. By January 15 last year, two IPOs had priced, compared to none so far in 2016. The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 13.6% year-to-date, compared to -8% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Synchrony Financial (NYSE:SYF), Alibaba (NYSE:BABA) and Citizens Financial Group (NYSE:CFG). The Renaissance International IPO Index is down 8.3% year-to-date, compared to -10% for ACWX. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include NN Group and Recruit Holdings.

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