U.S. IPO Weekly Recap: The First Marijuana-Related REIT Cuts Deal Significantly To Get Done

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Includes: IIPR
by: Renaissance Capital IPO Research

The post-Thanksgiving IPO market got off to a slower start than expected, with just one company raising $67 million, no filings and three launches this week, including Apollo-backed fixed-annuity provider Athene Holding, fluid subsystem delivery provider Ichor Holdings and Texas- and Louisiana-based E&P Wildhorse Resource Development. While Wildhorse launched its IPO just one day after OPEC reached a deal to cut production, we believe that most other JOBS act companies will wait to file, as it is too late for them to launch an IPO in 2016.

At the start of December, the average 2016 US IPO is up 26%, and 72% of IPOs are trading above their offer price, compared to one year ago, when just 44% of IPOs were trading above their offer price

IPO Pricings Week of November 28th, 2016
Issuer
Business
Deal Size
($mm)
Market Cap
($mm)
Price vs.
midpoint
First day
return
Return
at 12/2
Innovative Industrial Properties REIT
REIT focused on medical-use marijuana
$67 $68 0% -4.3% -7.8%

Up in smoke: Marijuana REIT cuts deal multiple times to complete IPO
Innovative Industrial Products REIT (NYSE:IIPR), a newly-formed REIT focused on medical-use cannabis cultivation facilities, raised $67 million by offering 3.35 million shares at $20; however, the pricing came after multiple updated filings, which both eliminated shares to be offered to management at no cost and slashed the deal size from $175 million to $80 million, before it further downsized the offering at the pricing. The IPO came at a tough time for REITs, as rates are widely expected to be raised at the December meeting of the Fed. Despite an experienced management team and the recent legalization of recreational marijuana in multiple states, the company faces increased scrutiny due to the dubious federal legal status of marijuana cultivation and production. The company traded off 4% on its first day and closed week down

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is down 2% year-to-date, while the S&P 500 is up 7%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Citizens Financial Group (NYSE:CFG) and Alibaba (NYSE:BABA). The Renaissance International IPO Index is down 7% year-to-date, while the ACWX is up 1%. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Recruit Holdings and Samsung C&T.