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US IPO Recap: Coupons.com jumps 88% and Biomet files for an IPO

Posted
3/10/2014 9:16:00 AM
By: Renaissance Capital
Referenced Stocks:COUP;VRNS;CRCM;BMET;SALE

Last week Coupons.com ( COUP ), the year's third tech IPO (after Varonis ( VRNS ) and Care.com ( CRCM )), continued a strong run for the sector with an 88% first-day gain; the three offerings now average an 83% total return to date. Others hope to cash in on that trend, as four enterprise SaaS companies set terms for an upcoming IPO. Three biotechs also launched, bringing the total number of biotechs to seven out of the twelve on the calender . Biomet ( BMET ), a private equity-backed maker of orthopedic products, submitted an initial filing on Friday for a deal that could raise over $1 billion. It was one of 10 new filers, more than half of which were non-biotech health care companies. Only four such firms have gone public this year. Possible IPO trends now include health care and technology companies, as well as private equity firms with aging portfolio companies, hoping to tap a strong IPO market.

Coupons.com prices at a premium and trades up 88%
Coupons.com, which distributes online coupons for consumer packaged goods through its websites and mobile apps, finished its first day of trading up 88% to $30 after pricing above the range at $16. Its closest competitor, RetailMeNot ( SALE ), has traded up 108% from its June 2013 IPO while Care.com, 2014's other Internet IPO, popped 43% on is first day but has since traded down 17% in aftermarket trading because of disappointing guidance. Last week's two biotech offerings (both up less than 10%), including the fifth pain treatment company of the year, continued a recent decline in IPO returns for the year's most active sector.

IPO pricings (week of March 3, 2014)
Company (Ticker)                             Business                                                                        Deal Size ($mm) IPO Price vs. Midpoint Return as of 3/7
Coupons.com ( COUP ) Digital coupons for consumer goods $168 23% 88%
Aquinox Pharmaceuticals (AQXP) Biotech: lung and bladder inflammation $46 0% 9%
Recro Pharma (REPH) Biotech: non-opioid pain treatment $30 -27% 4%

Four SaaS companies and three biotechs set terms
Technology and biotechnology companies, which accounted for all seven of the week's newly launched IPOs, offer investors high growth and potentially lucrative returns in an otherwise low-yield economic landscape. The only software IPO completed this year, Varonis, is trading up 143% from its IPO price. Castlight Health (CSLT), expecting to price this week, sells cloud-based software that allows employees of large self-insured companies to compare health care options and choose based on cost, personal need and quality of care. Paylocity (PCTY), an enterprise benefits SaaS company, will follow with an expected IPO next week, as will Q2 Holdings (QTWO), which sells an online banking SaaS platform to community banks. Amber Road (AMBR), which should also price next week, organizes and automates international trading logistics for importers and exporters. The most advanced of the new biotechs was MediWound (MDWD). At the end of last year in Europe, it launched its orphan-designated treatment that quickly removes the charred skin of severe burn victims, but the first quarter's financials are needed to tell whether the product gained traction.

IPO terms filings (week of March 3, 2014)
Company (Ticker)             Business                                                                Deal Size ($mm) LTM Sales ($mm)
Castlight Health (CSLT) SaaS for employee health care comparison $111 $13
Paylocity (PCTY) SaaS for payroll and HR management $100 $91
Q2 Holdings (QTWO) SaaS platform for online banking $93 $57
Akebia Therapeutics (AKBA) Biotech: once-daily oral treatment for anemia $76 $0
Amber Road (AMBR) SaaS for global trade management $75 $53
MediWound (MDWD) Biotech: severe burns and hard-to-heal wounds $75 $0
Ignyta (RXDX) Biotech: targeted cancer therapeutics $40 $0

Biomet's initial IPO filing could raise over $1 billion
The highly anticipated Biomet IPO is now in our pipeline after the company submitted an initial filing on Friday to raise $100 million, which is likely a placeholder for a deal that could raise well over $1 billion. Biomet, which is one of the largest producers of bone and joint replacements, had an adjusted EBITDA of $1.1 billion for the twelve months ended November 30, 2013. It was originally acquired in 2007 for $11.4 billion by a group of private equity firms (Blackstone, Goldman, KKR, TPG). Private equity activity shot up in 2013 (Hilton, SeaWorld, Dollar General, Antero, Quintiles) as valuations improved, a trend that looks to continue in 2014. Biomet is the third major initial IPO filing for Blackstone this year after Catalent (CTLT) and La Quinta (LQ). Goldman also has a stake in the newly launched Amber Road and recent Chinese filers iKang (KANG) and Tarena (TEDU). The co-founder of TPG introduced the possibility of an IPO on February 25.

Sportsman's Warehouse (SPWH), a private equity-backed outdoor sporting goods retailer that emerged from bankruptcy in 2009, also filed for an IPO. Moelis & Company (MC) filed on Tuesday and is staged to be the first investment bank to go public since 2007. Last week was the first of the year without a biotech filing for an IPO. Health care companies with revenue meanwhile, including Biomet, made up half of new filers.  

IPO initial filings (week of March 3, 2014)
Company (Ticker)                                              Business                                                                            Deal Size ($mm) LTM Sales ($mm)
Biomet ( BMET ) Orthopedic products manufacturer $1,000* $3,122
Dorian LPG (LPG) Liquefied petroleum gas shipping $288 $39
Sportsman's Warehouse Holdings (SPWH)
Outdoor sporting goods retailer $201 $656
iKang Healthcare Group (KANG) Chinese private medical center operator $150 $191
Five9 (FIVN) SaaS for company call centers $115 $84
Moelis & Company (MC) Investment bank and financial advisor $100 $411
Opower (OPWR) SaaS for utilities to show consumer activity $100 $89
Quotient (QTNT) More efficient diagnostic blood tests $75 $19
Adamas Pharmaceuticals (ADMS) Treatments for Parkinson's and Alzheimer's $69 $71
Corium International (CORI) Pharmaceutical company developing adhesive drugs $50 $48
*RC estimate

IPO market snapshot
So far this year, the Renaissance IPO ETF, a basket of newly public companies that trades under the symbol  IPO , has gained 7%. The 40 IPOs in 2014 have raised $7.2 billion and produced an average return of 42% from the IPO price. There have been 52 IPOs in the past 90 days, with total proceeds of $12.7 billion and an average return of 48% from the IPO price, and a post-IPO return of 14%, as measured by the Renaissance IPO ETF. The active IPO pipeline includes 113 companies looking to raise a total of $28.9 billion.