U.S. IPO Week Ahead: Energy IPOs Reignite Ahead Of August Slowdown

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Includes: CTRA, RNGR
by: Renaissance Capital IPO Research

Three deals are set to raise a combined $310 million in the week ahead. Two energy companies are coming to market, the sector's first IPO attempts since mid-May, when oil prices were on their way to hitting an 18-month low. Prices have since recovered +15%, and a large backlog of energy IPOs remains waiting in the pipeline.

Beyond this week, IPO activity should remain low to absent. Since 2012, the last two weeks of August have averaged just 1.4 deals. Nothing is currently on the calendar for the remainder of the month; however, we expect IPO activity to pick up again after Labor Day.

IPO Calendar

Issuer
Business

Symbol
Exchange

Deal Size($m)
Market Cap($m)

Price Range
Shares Filed

Bookrunners

Zealand Pharma
Denmark

ZEAL
Nasdaq

$75
$582

$19.30
3,900,000

Morgan Stanley
Goldman Sachs

Developing peptide-based treatments for type 2 diabetes.

Contura Energy
Bristol, TN

CTRA
NYSE

$150
$802

$23.00-27.00
6,000,000

Citi
Jefferies
Credit Suisse

Coal producer formed out of Alpha Natural Resources' restructuring.

Ranger Energy Services
Houston, TX

RNGR
NYSE

$85
$240

$16.00-18.00
5,000,000

Credit Suisse
Simmons & Co.
Wells Fargo

Provides well services for E&P companies in the Permian Basin.

Zealand Pharma, a Danish pharma listed on the Nasdaq Copenhagen, is targeting $75 million at a $582 million valuation in a deal underwritten by Morgan Stanley and Goldman Sachs. Its portfolio of peptide-based drugs consists of two approved treatments for type 2 diabetes that are licensed to Sanofi (NYSE:SNY), a potentially-large collaboration with Boehringer Ingelheim, and two wholly-owned candidates. While its own candidates have recently shown some promising results, adoption has been slow for the Sanofi drugs, while its Boehringer collaboration is still early stage.

Contura Energy, a leading US producer of both thermal and met coal, is looking to raise $150 million at an $802 million valuation. Contura was formed in 2016 from Alpha Natural Resources' 2015 bankruptcy and operates six mine complexes with total reserves of over 1.3 billion short tons. Contura has several growth opportunities through idle mines, but met coal prices are extremely volatile. Further, insiders are selling 100% of the deal and received a $100 million dividend in July. Contura will be the third coal company to go public this year, following Ramaco Resources (METC; -47% from IPO) in February and Warrior Met Coal (HCC; +27% from IPO) in April.

Ranger Energy Services, a provider of well services for E&P companies in the Permian Basin, is targeting $85 million at a $240 million valuation. Formed by PE firm CSL in 2014, Ranger is a play on the increasing popularity of horizontal fracking wells. Post-IPO, it will own 122 high-spec rigs and plans to accept delivery of 21 newbuilds from NOV in 2017, giving it one of the largest and youngest high-spec fleets. The business is highly cyclical and dependent on a stabilization in commodity prices to generate onshore E&P capex. However, insiders are buying up to $30 million on the IPO (35% of the deal).

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 23.6% year-to-date, ahead of the S&P 500, which is up 10.6%. Renaissance Capital's IPO ETF (NYSEARCA:IPO) tracks the index, and top ETF holdings include Ferrari (NYSE:RACE) and First Data (NYSE:FDC). The Renaissance International IPO Index is up 21.4% year-to-date while the ACWX is up 17.9%. Renaissance Capital's International IPO ETF (NYSEARCA:IPOS) tracks the index, and top ETF holdings include ABN AMRO Group (OTCPK:ABNRY) and Worldpay (OTC:WPYGY).