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US IPO Pipeline Update: 15 deals join the IPO calendar and 3 large tech companies file

By: Renaissance Capital
Posted: 6/11/2014 9:07:00 AM
Referenced Stocks: ABY;MRD;ECR;FELP;VNOM

Fifteen deals were added to the IPO calendar since last week's US IPO Pipeline Update , which would make this month busier than May, even with one whole week left for new deals to launch June initial public offerings. After three large tech companies submitted initial filings, the active IPO pipeline now has 130 companies expecting to raise $50.4 billion. The Renaissance IPO ETF (symbol: IPO ) is up 7% in the last 30 days compared to +4% for the S&P 500, suggesting the IPO market has become more receptive to new issuance.

It appeared that technology would edge out health care as the leading industry for IPOs in the second quarter, but a surge of biotechs set terms this past week to retain the sector's popularity. Surprisingly, none of the 15 IPO launches were tech, despite the industry's recent success . Of the 29 IPOs on the calendar for the rest of June, 69% intend to raise $100 million or less. Driven by biotechs in need of additional funding to continue clinical trials, 2014 IPOs have tended to be small (over half have raised less than $100 million).

Three energy companies now plan to follow Abengoa Yield ( ABY ) and Memorial Resource Development ( MRD ), which should both price on June 12. The largest IPO to set terms in the past week was Eclipse Resources ( ECR ), a horizontal well operator in the Utica and Marcellus Shale. The other two are both spinoffs, which have generally outperformed in the past year. Foresight Energy LP ( FELP ) operates coal mines in the Illinois Basin, and while the Carlyle-backed company claims its reserves could support over 100 years of production at current levels, Foresight will have to prove its long-term value in the face of falling coal prices and tougher environmental regulation. Viper Energy ( VNOM ), spun out of Diamondback Energy (FANG, up 370% from its October 2012 IPO), owns vertical and horizontal wells around the Permian Basin.

Of the 9 small health care companies to set terms this past week, 3 have collaboration revenue, 3 more are late-stage and 1 (Parnell Pharmaceuticals) has a marketed drug.

IPO terms filings (June 4, 2014 to June 11, 2014)
Company (Ticker)                                                   Business                                                                                      Deal Size ($mm) LTM Sales ($mm)
Eclipse Resources ( ECR ) Oil and gas E&P in the Appalachian Basin $864 $45
GoPro (GPRO) Wearable HD action cameras $401 $966
Foresight Energy LP ( FELP ) Coal producer spun out of Foresight Reserves $350 $968
Century Communities (CCS) Homebuilder in the western U.S.
$110 $287
Viper Energy Partners LP ( VNOM ) Oil and gas E&P spun out of Diamondback $100 $31
ZS Pharma (ZSPH) Biotech: treatment for hyperkalemia $80 $0
Kite Pharma (KITE) Biotech: immune system cancer treatment $78 $0
Zafgen (ZFGN) Biotech: treatment for obesity $75 $0
Ambrx (AMBX) Biotech: protein therapeutics to improve drug delivery $70 $20
Parnell Pharmaceuticals Holdings (PARN) Pharmaceutical products for animals $65 $12
Syndax Pharmaceuticals (SNDX)
Biotech: therapy for resistant breast cancer $60 $0
Minerva Neurosciences (NERV) Biotech: treatments for CNS diseases $60 $0
Ardelyx (ARDX) Biotech: treatments for kidney and gastrointestinal diseases $50 $31
Taggares Agriculture (TAG) Farming in the Pacific Northwest $46 $8
KineMed (KNMD) Biomarker tests that measure disease progression $32 $7

Three potentially $1+ billion tech IPOs added to the pipeline 

Alibaba had been the only tech company in the active pipeline of IPOs expected to raise over $500 million, but it is now joined by three more. While we estimate Cnova's (CNV) deal size to be $1 billion, Travelport Worldwide (TVPT) and GoDaddy (DADY.RC) could also raise over $1 billion, depending on how much their PE backers choose to sell. With revenues of over $1 billion, none qualifies as an emerging growth company, making their IPOs unlikely to arrive before mid-August. Cnova is the combined e-commerce businesses of French retailer Casino, with major operations in both France and Brazil. Its initial filing arrives as Chinese e-commerce site JD.com (JD) trades about 50% above the May IPO price. Travelport Worldwide had previously launched a $2 billion London IPO in 2010 but withdrew. Since then, the highly leveraged company has divested a significant portion of assets and lost market share of its core travel industry Global Distribution System to Amadeus and April IPO Sabre (SABR, up 20%). Majority-owned by KKR, Silver Lake and TCV, GoDaddy manages the world's largest number of website domain registrations (57 million). Peers Endurance (EIGI) and Wix.com (WIX) went public in the fourth quarter last year, and have since traded up 14% and 9%, respectively.

So far, 175 companies have filed for IPOs this year, and the total is on pace to reach 350 or more by year-end, compared to 256 last year. 115 companies filed for IPOs during the 90 days ended May 31. That number was 110 at the end of April, and the previous time it broke 100 was in September 2007. The high filing activity is arguably more meaningful today than it was in 2007, now that a company can file and withdraw confidentially.

IPO initial filings (June 4, 2014 to June 11, 2014)
Company (Ticker)                                   Business                                                                                       Deal Size ($mm) LTM Sales ($mm)
Cnova (CNV)
E-commerce business of French retailer Casino $1,000* $3,944
Travelport Worldwide (TVPT) Global Distribution System for the travel industry
$800* $2,100
GoDaddy (DADY.RC) Website registration and hosting services $750* $1,188
Avolon Holdings (AVOL) Tenth largest aircraft leasing company $300* $481
HealthEquity (HQY) HSA custodian and platform provider $100 $68
Vascular Biogenics (VBLX) Biotech: gene therapy targeting certain cancers $75 $0
Pfenex (PFNX) Biotech: treatment for wet AMD
$75 $11
* Renaissance Capital estimate