United States: September 2016 - IPO Market Review

Last Updated: October 18 2016
Article by David A. Westenberg

The IPO market produced 14 IPOs in September, representing the second highest monthly figure for 2016 and only one behind May's tally of 15 IPOs. The month's total represents the third busiest September since 2000, trailing 2013 (20 IPOs) and 2014 (17 IPOs).

Despite the pick-up in deal flow in September, year-to-date results continue to lag 2015. Over the first three quarters of 2016, there have been 69 IPOs—43% below the 122 IPOs over the corresponding period in the prior year.

Gross proceeds for September were $2.00 billion, the third highest monthly figure for 2016 and bringing gross proceeds over the first nine months of 2016 to $11.73 billion, or 36% below the $18.25 billion raised over the first nine months of 2016.

IPOs by emerging growth companies (EGCs) have accounted for 84% 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.

September produced three IPOs by life sciences companies. Over the first three quarters of 2016 there have been 31 IPOs by life sciences companies, representing 45% of the year's total compared to 47% in 2015 and 40% in 2014.

The median offering size for all IPOs over the first three quarters of 2016 was $90.0 million, or 2% below the $91.7 million for all IPOs in 2015, while the median offering size for life sciences company IPOs was $55.0 million, just under half of the $111.9 million figure for non-life sciences companies.

Year-to-date, the median offering size for IPOs by EGCs was $72.8 million (the lowest annual figure since enactment of the JOBS Act), compared to $531.4 million for non-EGCs (the highest annual figure since 2012). 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 three quarters of 2016 was $58.9 million, or 56% 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 to 2014. The median life sciences IPO company had annual revenue of $5.2 million through the first three quarters of 2016, compared to $218.2 million for all other IPO companies (the highest annual figure since 2009).

Half of the companies that went public in September were profitable. Over the first three quarters of 2016, 39% of IPO companies have been profitable, compared to 30% in 2015 and 36% in 2014, but well below the 54% that prevailed over the five-year period preceding 2014. Excluding life sciences companies, however, 63% of IPO companies over the first three quarters of 2016 have been profitable, compared to 55% over the five-year period preceding 2016.

Every one of the month's new offerings posted a first-day gain, with the average September IPO ending its first trading day 36% above its offering price. Over the first three quarters of 2016, the average IPO has produced a first-day gain of 14%. The average 2016 life sciences IPO company gained 8% in first-day trading, compared to 20% for all other 2016 IPO companies.

Over the first three quarters of 2016, 20% of IPOs have been "broken" (IPOs whose stock closes below the offering price on their first day). This figure is down from 26% in 2015 and 27% in 2014.

At September month-end, the average IPO company was trading 43% above its offering price. At September 30, only ten 2016 IPO companies (14% of the total) were trading below their offering price, while 52% were trading at least 25% above their offering price. The average 2016 life sciences company ended September up 30% from its offering price, while the average non-life sciences IPO company ended the month 53% above its offering price.

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

  • Everbridge, a global software company that provides critical communications and enterprise safety applications that enable customers to automate and accelerate the process of keeping people safe and businesses running during critical events, priced at the midpoint of the range and produced a first day gain of 27%.
  • FB Financial, a bank holding company, headquartered in Nashville, Tennessee, priced above the range and ended its first trading day up 9% from its offering price.
  • The Bank of N.T. Butterfield & Son, a full service bank and wealth manager headquartered in Hamilton, Bermuda, priced at the midpoint of the range and gained 5% in first-day trading.
  • Novan, a late-stage pharmaceutical company focused on redefining the standard of care in dermatology through the development and commercialization of innovative therapies using its nitric oxide platform, priced at the low end of the range and ended its first day of trading up 65% from its offering price—the fourth best first day gain of the year.
  • The Trade Desk, a provider of a technology platform that enables ad buyers to share their customized messages and ideas with the people and in the context they deliberately choose, priced at the high end of an upwardly revised range and gained 67% in first-day trading—the third best first day gain of the year.
  • CapStar Financial Holdings, a bank holding company, headquartered in Nashville, Tennessee, priced slightly below the midpoint of the range and ended its first trading day with a 6% gain.
  • e.l.f. Beauty, one of the fastest growing, most innovative cosmetics companies in the United States, priced above the range and produced a 56% first day gain.
  • AC Immune, a clinical-stage biopharmaceutical company leveraging its two proprietary technology platforms to discover, design and develop novel, proprietary medicines for prevention, diagnosis and treatment of neurodegenerative diseases associated with protein misfolding, priced at the low end of the range and gained 42% in first-day trading.
  • Apptio, the leading provider of Technology Business Management solutions, priced above the range and ended its first day of trading up 41% from its offering price.
  • Gridsum Holding, a leading provider of sophisticated data analysis software for multinational and domestic enterprises and government agencies in China, priced above the range and ended its first trading day with a 21% gain.
  • Valvoline, one of the most recognized and respected premium consumer brands in the global automotive lubricant industry, known for high quality products and superior levels of service, priced within the range and produced a first day gain of 5%.
  • Fulgent Genetics, a rapidly growing technology company with an initial focus on offering comprehensive genetic testing to provide physicians with clinically actionable diagnostic information they can use to improve the overall quality of patient care, priced at the low end of a downwardly revised range and gained 2% on its first trading day.
  • Tabula Rasa HealthCare, a leader in providing patient-specific, data-driven technology and solutions that enable healthcare organizations to optimize medication regimens to improve patient outcomes, reduce hospitalizations, lower healthcare costs and manage risk, priced below the range and ended its first day up 24% from its offering price.
  • Nutanix, a provider of a leading next-generation enterprise cloud platform that converges traditional silos of server, virtualization and storage into one integrated solution and can also connect to public cloud services, priced above an upwardly revised price range and soared 131% from its offering price in first-day trading—the best first day gain of the year and the first "moonshot" since August of 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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