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U.S. IPO Week Ahead: IPO Market Is All Smiles With 6 Deals Including SmileDirectClub

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Includes: ALRS, NET, SDC, STSA, SWTX, TXG, WE
by: Renaissance Capital IPO Research
Summary

After a month-long break, the IPO market is picking up with six deals expected to raise $2.2 billion in the week ahead.

Three companies are targeting IPO valuations of $3.5 billion or more.

SmileDirectClub is the week's largest offering, raising a proposed $1.2 billion at a market cap of nearly $8.0 billion.

After a month-long break, the IPO market is picking up with six deals expected to raise $2.2 billion in the week ahead. Three companies are targeting IPO valuations of $3.5 billion or more.

SmileDirectClub (NASDAQ:SDC) is the week's largest offering, raising a proposed $1.2 billion at a market cap of nearly $8.0 billion. Over half of proceeds are going to insiders. Backed by CD&R, SmileDirectClub has rapidly grown to $622 million in trailing sales by offering clear teeth-straightening aligners that are more convenient and affordable than many existing options. Its direct-to-consumer model targets a massive global market, but the company is burning through cash, while competitors are joining the fray.

CloudFlare (NYSE:NET) plans to raise $385 million at a market cap of $3.5 billion. Backed by NEA, the company's web optimization and security platform enhances over 20 million internet properties, growing fast with high gross margins. Competition, losses, and a shift to enterprise customers all pose potential risks, though software IPOs this year have averaged a strong 51% pop on the first day.

10x Genomics (NASDAQ:TXG) is also going after a $3.5 billion market cap, which would make it the largest diagnostics IPO in over 10 years. Backed by Foresite and Venrock, 10x Genomics' single-cell sequencing platform has enjoyed strong traction in the biomedical industry, growing 85% in the first half of the year (-5% EBITDA margin).

Two pre-revenue drug developers are going public. Backed by Bain, OrbiMed and Pfizer, SpringWorks Therapeutics (NASDAQ:SWTX) is developing precision medicines for rare cancers, and targets a large $725 million market cap. RA Capital and TPG-backed Satsuma Pharmaceuticals (NASDAQ:STSA) is developing a nasal spray to treat migraines.

North Dakota-based bank Alerus Financial (NASDAQ:ALRS) is raising $75 million in a Nasdaq uplisting. The bank has diversified its revenue by focusing on retirement and benefit services.

The IPO pipeline's most anticipated deal, The We Company (WE) may launch as soon as Monday.

U.S. IPO Calendar

Issuer
Business

Deal Size
Market Cap

Price Range
Shares Filed

Top
Bookrunners

10x Genomics
Pleasanton, CA

$297M
$3,535M

$31 - $35
9,000,000

JP Morgan
Goldman

Provides a single-cell sequencing platform for biomedical research.

Alerus Financial
Grand Forks, ND

$75M
$401M

$22 - $24
3,250,000

Raymond James
DA Davidson

Regional bank with a focus on retirement and benefit services.

SmileDirectClub
Nashville, TN

$1,200M
$7,956M

$19 - $22
58,537,000

JP Morgan
Citi

Develops and sells at-home teeth straightening systems.

CloudFlare
San Francisco, CA

$385M
$3,503M

$10 - $12
35,000,000

Goldman
Morgan Stanley

Provides a cloud platform for website security and web content optimization.

Satsuma Pharmaceuticals
South San Francisco, CA

$75M
$262M

$14 - $16
5,000,000

Credit Suisse
Leerink

Developing a fast-acting dry powder nasal spray for migraines.

SpringWorks Therapeutics
Stamford, CT

$125M
$725M

$16 - $18
7,352,941

JP Morgan
Goldman

Phase 3 biotech developing small molecule therapies for rare cancers.

The following IPOs are expected to price this week:

10x Genomics, which provides a single-cell sequencing platform for biomedical research, plans to raise $297 million by offering 9.0 million shares at a price range of $31.00 to $35.00. At the midpoint of the proposed range, 10x Genomics would command a market value of $3.5 billion. 10x Genomics, which was founded in 2012, booked $197 million in sales over the last 12 months. The Pleasanton, CA-based company plans to list on the Nasdaq under the symbol TXG. J.P. Morgan, Goldman Sachs and BofA Merrill Lynch are joint bookrunners on the deal.

Alerus Financial, a regional bank with a focus on retirement and benefit services, plans to raise $75 million by offering 3.3 million shares at a price range of $22.00 to $24.00. At the midpoint of the proposed range, Alerus Financial would command a market value of $401 million. Alerus Financial, which was founded in 1879, booked $183 million in revenue over the last 12 months. The Grand Forks, ND-based company plans to list on the Nasdaq under the symbol ALRS. Raymond James and D.A. Davidson are the joint bookrunners on the deal. The company is currently listed on the OTCQX under the symbol ALRS.

CloudFlare, which provides a cloud platform for website security and web content optimization, plans to raise $385 million by offering 35.0 million shares at a price range of $10.00 to $12.00. At the midpoint of the proposed range, Cloudflare would command a market value of $3.5 billion. Cloudflare, which was founded in 2009, booked $235 million in sales over the last 12 months. The San Francisco, CA-based company plans to list on the NYSE under the symbol NET. Goldman Sachs, Morgan Stanley, J.P. Morgan and Jefferies are joint bookrunners on the deal.

Satsuma Pharmaceuticals, which is developing a fast-acting dry powder nasal spray for migraines, plans to raise $75 million by offering 5.0 million shares at a price range of $14.00 to $16.00. At the midpoint of the proposed range, Satsuma Pharmaceuticals would command a market value of $262 million. Satsuma Pharmaceuticals was founded in 2016. The South San Francisco, CA-based company plans to list on the Nasdaq under the symbol STSA. Credit Suisse, SVB Leerink and Evercore ISI are the joint bookrunners on the deal. Insiders intend to purchase up to $25 million of the IPO (33% of the deal).

SmileDirectClub, which develops and sells at-home teeth straightening systems, plans to raise $1.2 billion by offering 58.5 million shares at a price range of $19.00 to $22.00. At the midpoint of the proposed range, SmileDirectClub would command a market value of $8.0 billion. SmileDirectClub, which was founded in 2014, booked $622 million in sales over the last 12 months. The Nashville, TN-based company plans to list on the Nasdaq under the symbol SDC. J.P. Morgan, Citi, BofA Merrill Lynch and Jefferies are joint bookrunners on the deal.

SpringWorks Therapeutics, a Phase 3 biotech developing small molecule therapies for rare cancers, plans to raise $125 million by offering 7.4 million shares at a price range of $16.00 to $18.00. At the midpoint of the proposed range, SpringWorks Therapeutics would command a market value of $725 million. SpringWorks Therapeutics was founded in 2017. The Stamford, CT-based company plans to list on the Nasdaq under the symbol SWTX. J.P. Morgan, Goldman Sachs and Cowen are the joint bookrunners on the deal.

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 8/29/19, the Renaissance IPO Index was up 34.4% year-to-date, while the S&P 500 had a gain of 20.4%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (NYSE:SPOT) and Roku (NASDAQ:ROKU). The Renaissance International IPO Index was up 13.1% year-to-date, while the ACWX was up 11.1%. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Meituan-Dianping and SoftBank Corp.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.