U.S. IPO Week Ahead: China's ZTO Express Delivers Largest IPO Of 2016 In A 6-Deal Week

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Includes: ACNT, BL, FMAX, MYOV, QTNA, RARX, ZTO
by: Renaissance Capital IPO Research

Six companies are on the US IPO calendar to raise $2.2 billion in the week ahead, or $2.6 billion including a large SPAC. October is set to surpass September as the year's most active month for IPOs. Filing activity has slowed heading into November, as expected.

  • 2 big IPOs: ZTO Express combines strong sales ($1.2B), growth (+70%) and margins (25% EBIT); Acushnet sells the world's leading golf brands, Titleist and FootJoy
  • 2 high-growth tech: Silver Lake SaaS BlackLine and Sequoia-backed chip maker Quantenna
  • 2 biotechs: Hedge fund-backed Myovant Sciences and NEA/Novartis-backed Ra Pharmaceuticals
Renaissance Capital's IPO Calendar - Week of 10/24/2016
Issuer
Business
Symbol
Exchange
Deal Size
$mil
Price Range
Shares Filed
Lead Managers
ZTO Express
Shanghai, China
ZTO
NYSE
$1,262 $16.50 - $18.50
72,100,000
Morgan Stanley
Goldman Sachs (Asia)
China Renaissance
Leading Chinese express delivery company.
Acushnet Holdings
Fairhaven, MA
ACNT
NYSE
$435 $21.00 - $24.00
19,333,332
J.P. Morgan
Morgan Stanley
Nomura Securities
Manufactures and markets golf equipment under several brands (e.g. Titleist).
Myovant Sciences
Hamilton, Bermuda
MYOV
NYSE
$176 $12.00 - $15.00
13,000,000
Citi
Cowen & Company
Evercore ISI
Newly-formed biotech developing an acquired therapy for endocrine disorders.
BlackLine
Woodland Hills, CA
BL
Nasdaq
$120 $13.00 - $15.00
8,600,000
Goldman Sachs
J.P. Morgan
Provides a cloud-based platform for automating financial reporting.
Quantenna Communications
Fremont, CA
QTNA
Nasdaq
$101 $14.00 - $16.00
6,700,000
Morgan Stanley
Barclays
Deutsche Bank
Fabless designer of next-generation chipsets for high-speed Wi-Fi networks.
Ra Pharmaceuticals
Cambridge, MA
RARX
Nasdaq
$75 $12.00 - $14.00
5,800,000
Credit Suisse
Jefferies
BMO Capital Markets
Developing small molecule therapies for rare immune disorders.
GTY Technology Holdings
Las Vegas, NV
GTYHU
Nasdaq
$400 $10.00 - $10.00
40,000,000
Citi
Blank check company formed by the former CEOs of Accenture and EMC to acquire a technology business.
Full Spectrum
Sunnyvale, CA
FMAX
Nasdaq
$15 $7.00 - $9.00
1,875,000
Joseph Gunnar & Co.
Develops and sells products used to create private cellular networks.

Chinese delivery company set to deliver year's largest IPO

ZTO Express' (NYSE:ZTO) planned $1.2 billion IPO makes it the year's largest to date, and the largest US IPO from a Chinese company since Alibaba (NYSE:BABA) in September 2014. Similarly, ZTO is a direct play on China's growing e-commerce market, and 77% of its parcel volume consists of items ordered from Alibaba. That concentration is a notable risk, and while the shipper's volumes have picked up, revenue per parcel could continue to drop off. That said, ZTO ticks all the boxes that are part and parcel of a solid IPO, as a highly profitable market leader that is taking share in an industry with strong secular growth.

Titleist is teed up

Acushnet Holdings (Private:ACNT) is set to raise $435 million, all from private equity shareholders. The company offers the world's #1 golf ball (Titleist) as well as the #1 golf shoe and glove (FootJoy). It also boasts an experienced management team and generates more than enough cash to cover its planned 2.1% dividend. Potential hazards include the widespread decline in golfers over the past decade, which contributed to sales declining 2% in 2015.

A double dose of high-growth tech

The week's two tech IPOs both plan to raise over $100 million, a feat achieved by just six tech IPOs this year. If not for ZTO, either deal could have headlined this week's offerings, with 2016 tech IPOs up 56% on average.

BlackLine (NASDAQ:BL) is set to raise $120 million to pay down debt and fund its rapid expansion. Its automated financial reporting software is used by over 150,000 people worldwide. The company grew about 50% in the most recent quarter, and while BlackLine is still in the red on EBITDA, it recently turned free cash flow positive. Backed by Silver Lake and ICONIQ (buying 10% of the IPO), BlackLine's valuation is being pitched below high-growth SaaS peers.

Quantenna Communications (NASDAQ:QTNA) is eyeing a $101 million IPO in the week ahead. The fabless semiconductor company has raised over $160 million from venture firms, including Sequoia Capital, RUSNANO and Venrock. Its chipsets help power Wi-Fi networks, and are considered some of the most advanced on the market, helping to drive 56% growth in the most recent quarter. Like many semiconductor IPOs, it has high customer concentration and will challenge much larger competitors.

Hedge funds bring year's largest biotech IPO; strong VCs behind the other

Myovant Sciences (Pending:MYOV) is looking to raise $176 million to take an acquired therapy to the finish line. Its deal size would make it the year's largest IPO from a biotech, and it is also the youngest, having been formed eight months ago by the same hedge fund backers that brought Axovant Sciences (NYSE:AXON) public last year. Pitched at a valuation of about $800 million, Myovant is led by the former CMO of Medivation, and its board includes the ex-CFO of Anthem and the former US Secretary of Health and Human Services, Kathleen Sebelius.

Ra Pharmaceuticals (Pending:RARX) plans to raise $75 million to take its lead candidate into Phase 2 trials. The biotech is initially targeting a rare but life-threatening blood disorder, and believes its drug platform represents a multi-billion dollar market. The company boasts of premier biotech backers, NEA, Morgenthaler, Novartis, Novo and RA Capital; insiders have indicated on 40% of the deal.

A $400 million blank check

Formed by the former CEOs of Accenture and EMC, GTY Technology Holdings (Pending:GTYHU) is set to be one of the year's largest SPAC IPOs with a target of $400 million. It increased the deal size from $300 million, a signal of demand that no other SPAC this year has shown. However, SPACs typically begin trading near the offer price.

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index gained 2.1% this past week compared to the S&P's +0.4%, though the IPO Index's year-to-date gain of 0.5% still trails the S&P's 5%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba and Citizens Financial Group (NYSE:CFG). The Renaissance International IPO Index is down 2% year-to-date, while ACWX is up 4%. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include NN Group and Cheil Industries.

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