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US IPO Recap: Marketo and Tableau soar, May calendar stays full

By: Renaissance Capital
Posted: 5/20/2013 8:59:00 AM
Referenced Stocks: AMBI;DATA;MKTO;SPLK;TEP

Exactly one year after Facebook priced its ill-fated IPO, two fast-growing technology companies, Marketo ( MKTO ) and Tableau ( DATA ), surged on their first days of trading. Marketo, a marketing software company, jumped 78% on Friday in the best first-day performance since Splunk's ( SPLK ) 108% gain in April 2012. With Tableau's 64% pop, it was just the second time since 2000 (and the first time since 2010) that two companies produced first-day gains of more than 50% on the same day. The seven IPO pricings for the week pushed May's total to 22, which is the highest monthly total since November 2007. Upcoming IPO activity remained strong as well, with four companies setting terms and six making initial filings.

IPO pricings (week of May 13, 2013)
Company (Ticker) Business Deal Size ($mm) Price vs. Midpoint Return
Ambit Biosciences ( AMBI ) Early-stage biotech $65 -43% -16%
Marketo ( MKTO ) Marketing software $79 8% 78%
Tableau Software ( DATA ) Data visualization software $254 27% 64%
Tallgrass Energy ( TEP ) Midstream energy assets $281 -2% 3%
Trade Street (TSRE) Apartment REIT $63 -17% -3%
UBIC (UBIC) eDiscovery software $9 -1% -1%
William Lyon Homes (WLH) US homebuilder $218 9% 5%

Onrush of pricings continues, returns pick up

Until Friday, last week looked to be yet another stretch of robust pricing activity paired with weak returns. On Thursday, the week had already become the fifth out of the last six to have at least five IPO pricings, but three of the five IPOs had posted negative first-day returns. Of the 20 IPOs that had priced so far in May, only one had gained more than 10% on its first day. By contrast, through April, more than half of the year's 44 IPOs had done so.

But on Friday, Marketo and Tableau became 2013's top two first-day performers as well as two of the top four IPOs by total return. Both were lifted by enthusiasm for new enterprise software offerings and both came public with top-line growth near 100%.  Marketo's marketing software automates tasks such as customer tracking and is used by 2,300 customers, including GE, Fox and Symantec. Tableau has 10,900 customers and, unusually for recent software IPOs, has been profitable for three years. Tableau priced at $31, well above its initially proposed range of $23 to $26; if it had priced at the midpoint, it would have generated a first-day return of 107%. 

The next best return of the week, a comparatively paltry 5%, came from William Lyon Homes (WLH), the third homebuilder IPO of 2013 (after TRI Pointe Homes (TRI) and Taylor Morrison (TMHC)). William Lyon, which was previously listed but filed for bankruptcy in 2011, closed 268 homes in the first quarter for $76 million in sales, a 140% increase year-over-year.

IPOs setting terms (week of May 13, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
Constellium (CSTM) Aluminum products $400 $4,628
Global Brass and Copper (BRSS) Brass and copper products $150 $1,652
Kamada (KMDA) Protein therapeutics $60 $66
Ply Gem Holdings (PGEM) Exterior building products $300 $1,139

Three large private-equity backed deals among the four added to calendar

Three of last week's newly launched deals, Constellium (CSTM), Global Brass and Copper (BRSS) and Ply Gem (PGEM), have generated more than $1 billion of sales in the past year. Constellium, which is based in the Netherlands, made its first public filing and simultaneously launched its roadshow on Monday. Both it and Global Brass and Copper are private-equity backed metals companies that have low margins relative to peers, and both experienced declines in volumes shipped during the first quarter. Ply Gem, a manufacturer of residential exterior building products, is also backed by a private equity firm, CI Capital Partners, and is looking to ride a recovery in the US housing market.

New IPO filers (week of May 13, 2013)
Company (Ticker) Business Deal Size ($mm) LTM Sales ($mm)
bluebird bio (BLUE) Early-stage biotech $86 $1
Constellium (CSTM) Aluminum products $400 $4,628
Covisint (COVS) Communication platform $100 $86
Esperion Therapeutics (ESPR) Early-stage biotech $70 $0
Independence Realty Trust (IRT) Apartment REIT $50 $16
PTC Therapeutics (PTCT) Late-stage biotech $85 $29

Six new filers include fast-growing Covisint and three biotechs

Acquired by Compuware (CPWR) in 2004, Covisint (COVS) provides secure, cloud communication and collaboration platforms primarily to the auto and healthcare industries. It has grown revenues at a CAGR of 37% since 2010. Esperion Therapeutics (ESPR) was previously listed on the NASDAQ from 2000 until 2004, when Pfizer acquired it for $1.3 billion. Esperion's management re-formed the company in 2008 and then reacquired the rights to a cholesterol-lowering drug candidate, which is now in Phase 2 trials. PTC Therapeutics (PTCT), which originally filed for an IPO in 2006, has a drug candidate for certain types of muscular dystrophy and cystic fibrosis and began dosing for Phase 3 trials in April.