Goldman's (NYSE:GS) LBO, PSAV, failed to price this week and officially postponed its offering on Friday, reflecting the uncertain environment currently faced by investors.
The IPO market is struggling to build momentum amid market volatility and macroeconomic disturbances. Along with continued talks of a Brexit, the Fed declined to raise rates again, and the VIX Volatility Index spiked midweek, ending Friday above 19 and well above Monday's open. In the last two weeks, four companies have come public, of which two priced substantially below the midpoint (Atkore -24%; Viveve -38%), and only one, Paragon Commercial, had a positive first day (but it only rose 2%). Just seven companies have come public so far this month, well off the pace of 35 IPOs last June.
No support for audiovisual support
PSAV (PSAV) officially postponed its offering on Friday, unable to get the deal done despite slashing the range on Thursday (from $14-$17 to $12-$13) and removing insider selling. Of concern to potential investors are PSAV's flat EBITDA margins, high leverage and cyclicality.
A Paragon of micro-cap
Two small-cap IPOs priced this week, raising $39 million in total. On Wednesday, Paragon Commercial (OTCQX:PBNC) raised $25 million by selling 736,000 shares at $34. The North Carolina bank had been quoted on the OTCQX and is now listed on the Nasdaq. It traded up almost 2% in its first day of trading, and it ended the week up 3%. Viveve Medical (NASDAQ:VIVE), a medical device maker, priced its IPO 38% below the originally proposed price at $5 on Tuesday, raising $14 million to commercialize its non-invasive system for reversing vaginal laxity. It traded down 1% in its debut and ended the week flat.
| IPO Pricings Week of June 13th, 2016 | |||||
| Issuer Business | Deal Size ($mm) | Market Cap ($mm) | Price vs. midpoint | First day return | Return at 6/17 |
| Paragon Commercial | $25 | $182 | 0% | +1.8% | +2.9% |
| North Carolina commercial bank with three branches and $1.3 billion in assets. | |||||
| Viveve Medical | $14 | $51 | -38% | -1.0% | -0.4% |
| Commercializing a non-invasive medical system that reverses vaginal laxity. | |||||
IPO Pipeline Update
IPO filing activity remains tepid, with just four filings this week, and only nine in the month. Camping World Holdings (NYSE:CWH), the largest RV retailer in the US, filed for an IPO to raise $200 million. Argentinian residential real estate developer TGLT (TGLT), which is currently listed in Buenos Aires and on the US OTC market (TGLTY), filed to raise $50 million on the NYSE. In addition, medical device maker OrthoPediatrics (NASDAQ:KIDS) filed to raise $75 million.
Several companies, some of which have been flying a holding pattern on their IPOs since 2015, updated their filings as they wait for the right market. LBOs Patheon (NYSE:PTHN), which originally filed in June 2015, and McGraw-Hill Education (MHED), which first filed in September 2015, updated their financials. Indian low-cost solar power utility Azure Power Global (NYSE:AZRE), which initially filed in December 2015, and AdvancePierre Foods (NYSE:APFH) also disclosed updated financials.
The IPO market now looks to Twilio (NYSE:TWLO) to end the drought of high-growth tech offerings.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 6% year-to-date, while the S&P 500 is up 2%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (NYSE:BABA), Synchrony Financial (NYSE:SYF) and Citizens Financial Group (NYSE:CFG). The Renaissance International IPO Index is down 7% year-to-date, while ACWX is flat. 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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