October 2016 IPO Market Review

The IPO market produced 19 IPOs in October, representing the highest monthly figure since the 33 IPOs in June 2015. Over the first ten months of 2016, there have been 88 IPOs—36% below the 138 IPOs over the corresponding period of 2015.

Buoyed by the largest IPO of the year, the $1.41 billion IPO by China’s ZTO Express, gross proceeds for October were $4.57 billion, the highest monthly figure since October 2015. The first 10 months of 2016 have produced gross proceeds of $16.30 billion, 30% below the $23.34 billion raised over the first 10 months of 2015 and the third lowest annual tally over the past 12 years.

IPOs by emerging growth companies (EGCs) have accounted for 83% of the year’s IPOs, down from 93% in 2015. Since enactment of the JOBS Act in 2012, 85% of all IPOs have been by EGCs.

October produced six IPOs by life sciences companies. Over the first 10 months of 2016, there have been 37 IPOs by life sciences companies, representing 42% of the year’s total compared to 47% in 2015 and 40% in 2014. In absolute terms, however, the 2016 life sciences IPO count falls far short of the 98 life sciences IPOs in 2014 and 72 in 2015.

The median offering size for all IPOs over the first 10 months of 2016 was $94.5 million, or 3% above the $91.7 million for all IPOs in 2015, while the median offering size for life sciences company IPOs was $60.5 million, less than half of the $130.0 million figure for non-life sciences companies.

Year-to-date, the median offering size for IPOs by EGCs was $80.1 million, compared to $346.5 million for non-EGCs (the lowest annual figures since enactment of the JOBS Act). From 2012 to 2015, the median EGC IPO offering size was $87.0 million, compared to $425.5 million for non-EGCs.

The median annual revenue of IPO companies through the first 10 months of 2016 was $66.5 million, or 76% above the $37.8 million median figure for 2015, but well below the $92.7 million median figure for the five-year period from 2010 through 2014. The median life sciences IPO company in the first 10 months of 2016 had annual revenue of $4.0 million, compared to $214.3 million for all other IPO companies (the highest annual figure since 2009).

Only four IPO companies in October were profitable. Over the first 10 months of 2016, 35% of IPO companies have been profitable, compared to 30% in 2015 and 36% in 2014, but well below the 54% figure that prevailed over the five-year period preceding 2014. Excluding life sciences companies, 53% of IPO companies over the first 10 months of 2016 have been profitable, just shy of the 55% over the five-year period preceding 2016.

Following September, a month where all the month’s new offerings posted a first-day gain, only 10 October IPOs posted a first-day gain. Two of the month’s new offering were flat in first-day trading while the remaining seven were “broken” (IPOs whose stock closes below the offering price on their first day).

Through October 31, the average 2016 IPO has produced a first-day gain of 13%, compared to 16% in 2015 and the lowest annual figure since 2010. The average 2016 life sciences IPO company has gained 8% in first-day trading, compared to 17% for all other 2016 IPO companies.

Over the first 10 months of 2016, 24% of IPOs have been “broken”. This figure is down from 26% in 2015 and 27% in 2014.

At October month-end, the average 2016 IPO company was trading 21% above its offering price. At October 31, 38% of 2016 IPO companies were trading below their offering price, while 35% were trading at least 25% above their offering price. The average 2016 life sciences company ended October up 19% from its offering price, while the average non-life sciences IPO company ended the month 23% above its offering price.

IPO activity in October consisted of offerings by the following companies listed in the order they came to market:

  • Advanced Disposal Services, a leading integrated provider of non-hazardous solid waste collection, transfer, recycling and disposal services operating primarily in secondary markets or under exclusive arrangements with municipalities, priced at the low end of the range and produced a first-day gain of 11%.
  • AquaVenture Holdings, a multinational provider of Water-as-a-Service solutions that provides its customers with a reliable and cost-effective source of clean drinking and process water primarily under long-term contracts that minimize capital investment by the customer, priced at the low end of the range and ended its first day of trading up 22% from its offering price.
  • Coupa Software, the leading provider of a unified, cloud-based spend management platform that connects more than 460 organizations with more than two million suppliers globally, priced an upsized IPO at the high end of an upwardly revised price range and gained 85% in first-day trading—the third best first-day gain of the year.
  • Obalon Therapeutics, a commercial-stage medical device company focused on developing and commercializing innovative medical devices to treat obese and overweight people by facilitating weight loss, priced within the range and was flat in first-day trading.
  • Camping World Holdings, a provider of a comprehensive portfolio of services, protection plans, products and resources for recreational vehicle enthusiasts, priced at the midpoint of the range and produced a 2% first-day gain.
  • Everspin Technologies, the leading provider of MRAM solutions that offer the persistence of non-volatile memory, a type of memory that retains information even in the absence of power, with the speed and endurance of random access memory (RAM), and enables the protection of mission critical data particularly in the event of power interruption or failure, priced an upsized IPO below the range and eked out a two cent gain in first-day trading.
  • Azure Power Global, a seller of solar power in India on long-term fixed price contracts to its customers, at prices which in many cases are at or below prevailing alternatives for these customers, priced below the range and ended its first day of trading down 19% from its offering price.
  • AzurRx BioPharma, a company engaged in the research and development of non-systemic biologics for the treatment of patients with gastrointestinal disorders, priced a downsized IPO below the original range and ended its first trading day down less than 1% from its offering price.
  • Extraction Oil & Gas, an independent oil and gas company focused on the acquisition, development and production of oil, natural gas and natural gas liquid reserves in the Rocky Mountains, primarily in the Wattenberg Field of the Denver-Julesburg Basin of Colorado, priced above the range and gained 15% on its first day of trading.
  • Mammoth Energy Services, an integrated, growth-oriented oilfield service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves, priced at the low end of the range and declined 12% in first-day trading.
  • CRISPR Therapeutics, a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics, priced below the range and ended its first day of trading with a gain of less than 1%.
  • Forterra, a leading manufacturer of pipe and precast products by sales volume in the United States and Eastern Canada for a variety of water-related infrastructure applications, including water transmission, distribution and drainage, priced below the range and ended its first trading day down 8% from its offering price.
  • iRhythm Technologies, a commercial-stage digital healthcare company redefining the way cardiac arrhythmias are clinically diagnosed by combining its wearable biosensing technology with cloud-based data analytics and machine-learning capabilities, priced an upsized IPO above the range and produced a 53% first-day gain.
  • Ra Pharmaceuticals, a clinical-stage biopharmaceutical company using its proprietary peptide chemistry platform to develop novel therapeutics for the treatment of serious diseases that are caused by excessive or uncontrolled activation of the complement system, priced an upsized IPOs at the midpoint of the range and was flat in first-day trading.
  • Myovant Sciences, a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapies for women’s health diseases and other endocrine-related disorders, priced an upsized IPO above the range and ended its first day of trading 12% below its offering price.
  • ZTO Express, a leading express delivery company in China and one of the largest express delivery companies globally, in terms of total parcel volume in 2015, priced above the range and declined 15% in first-day trading.
  • Acushnet Holdings, a global leader in the design, development, manufacture and distribution of performance-driven golf products, priced below the range and produced a 6% first-day gain.
  • BlackLine, a creator of a comprehensive cloud-based software platform designed to transform and modernize accounting and finance operations for organizations of all types and sizes, priced at the high end of an upwardly revised price range and ended its first day of trading 39% above its offering price.
  • Quantenna Communications, a leader in the design, development and marketing of advanced high-speed wireless communication solutions enabling wireless local area networking, priced at the high end of the range and ended its first trading day down 3% from its offering price.