Last week's lone US IPO, Hi-Crush Partners (
HCLP
), followed a familiar path on its way to a 15% gain. The frac
sands producer, which is structured as an MLP and offers
investors a roughly 10% dividend yield, raised $191 million on
Wednesday and became the
fourth consecutive US IPO to price below the
range
. Including Hi-Crush, eleven of the past twelve IPOs have priced
below the originally proposed midpoint, and all but three have
produced positive returns (9% on average). As we noted
last week
, investors have been aggressive in seeking discounts for
economically sensitive companies, and Hi-Crush, with its exposure
to oil and natural gas prices, was no exception. Aided by more
attractive pricing levels and a rising equity market, aftermarket
returns have trended favorably, and August's seven deals have
produced an average aftermarket return of 3%. In the three months
since Facebook (
FB
), the average IPO has gained 18%, including a 5% average
aftermarket gain.
Carveouts fill up the pipeline
While pricing activity slowed,
filings activity
reached a one-month high as six deals were added to the pipeline,
potentially raising upwards up of $5 billion. The largest were
Pfizer's animal health unit, Zoetis (ZOET.RC), which is expected
to raise $2 billion or more, and Grupo Financiero Santander
Mexico (BSMX), which filed late Friday. Reports indicate that it
could raise $4 billion in a dual listing (US-Mexico). Blyth-owned
ViSalus (VSLS.RC), a direct marketer of nutritional supplements,
filed to raise $175 million on Friday. Zoetis are ViSalus are two
of six carveouts to file in August as larger companies seek to
unlock value.
A previously confidential filer, online real estate listings
company Trulia (TRLA), made its first public submission, seeking
$75 million. Trulia bears a strong resemblance to Zillow (
Z
), one of 2011's top US IPOs (up 85%). Also filing were waste
management services provider Safety-Kleen (SK), which is now
seeking $400 million after attempting to go public in 2008, and
biotech Regulus Therapeutics (RGLS), which hopes to raise $58
million.
Social media IPOs turn a cold shoulder
The weak performance of Manchester United (
MANU
) and Facebook marked a difficult week for high-profile IPOs.
Manchester United, which raised $233 million on August 9 and
finished flat in its trading debut, closed below its offer price
for the first time on Thursday and ended the week down 4%.
Facebook hit a new post-IPO low on Friday, following its first
material lockup release. Its 50% decline makes it the
second-worst performing IPO of 2012. Other social media giants
have also been battered: Groupon (
GRPN
), a $700 million November 2011 IPO, reached its own post-IPO low
(down 76%) last week after reporting a continued slowdown in
growth on Monday; Zynga (ZNGA), a $1 billion December 2011 IPO,
has dropped 40% since slashing its guidance in late July and is
now 70% below its offer price.
While the dismal performance of Facebook, Groupon and Zynga has
dealt a huge blow to investor sentiment, not all social media
IPOs have disappointed. Both LinkedIn (LNKD; up 124%; May 2011
IPO) and Yelp (YELP; up 34%; March 2012 IPO) have delivered
strong gains. A key to their success so far has been accelerating
(and sustained growth) at the time of and following their IPOs.
Groupon and Facebook both reported decelerating growth in the
quarter before going public (and have continued to do so), while
Zynga's growth was largely hit-driven.