June and Q2 2014 IPO Market Review

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July 16, 2014

The June IPO market produced 30 IPOs, representing the highest monthly tally since the 65 IPOs in August 2000. June’s activity brings the count for the first half of 2014 to 132 IPOs—89% above the 70 IPOs in the first half of 2013 and the strongest pace for any six-month period since 2000.

The last week of June alone produced 11 IPOs—the second double-digit weekly tally in 2014 and the highest weekly number of IPOs since the 12 IPOs in the first week of February 2007.

Gross proceeds in June were $7.43 billion, representing the sixth highest monthly figure since 2000. The June figure brings total gross proceeds for the first six months of 2014 to $28.24 billion—two-thirds higher than the $16.86 billion raised by IPOs in the first six months of 2013.

The percentage of IPOs by emerging growth companies (EGCs) has continued its climb, reaching 89% of IPOs in the first six months of 2014, compared to 82% in 2013 and 76% in the portion of 2012 that followed enactment of the JOBS Act.

June saw a double-digit count of IPOs by venture capital–backed US issuers for the third month in 2014, bringing the year-to-date total to 62, only 10 below the tally for all of 2013. With six private equity–backed US issuer IPOs in June, the total of 23 over the first half of 2014 is two above the 21 PE-backed IPOs in the first half of 2013 and represents the highest number of PE backed IPOs in the first half of the year since the first half of 2006.

June produced nine IPOs by life sciences companies. The total of 53 life sciences company IPOs through June 30 is now three above the full-year 2013 count of 50. Following a two-month period in which life sciences company IPOs were not well received by the market—with the average April and May life sciences company declining 2% on its first day of trading—the average June life sciences company IPO produced a 17% first-day gain, and only a pair declined on their first day of trading.

Overall, broadly-defined technology and life sciences companies accounted for 73% of the year’s IPOs through June 30, up from 59% over the prior three-year period and representing the highest annual percentage since the end of the dot-com bubble in 2000.

The $94.3 million median offering size for all IPOs in the first half of 2014 was 12% lower than the median offering size of $107.4 million in 2013, although equal to the median offering size for all IPOs in 2012, and represents the lowest yearly figure since the $89.3 million median offering size in 2004. Drawn down by the $55.0 million median offering size for life sciences IPOs, the median size for VC backed IPOs in the first half of 2014 was $79.0 million—slightly higher than the $78.3 million median in 2013 but still the second lowest level since the $72.0 million median in 2006. The median size for EGC IPOs in the first half of 2014 was $88.9 million compared to $554.9 million for other IPO companies.

The percentage of profitable IPO companies declined from 55% in 2012 to 43% in 2013 and to 33% in the first half of 2014, with only 13% of 2014 life sciences IPO companies being profitable. The median annual revenue for IPO companies fell from $133.6 million in 2012 to $89.9 million in 2013 and to $78.9 million in the first half of 2014—the lowest level since the $74.5 million figure in 2007.

The average IPO company in 2014 through June 30 ended its first day of trading with a 15% gain—below the average first-day gains of 21% for IPOs in 2013 and 16% for IPOs in 2012, but still the third highest average first-day gain since 2000. Year-to-date, 25% of IPOs were “broken” (closing below the offering price on the first day)—above the 22% of broken IPOs in 2013 but only a single percentage point above the figure for the five-year period preceding 2014.

The average 2014 IPO company ended June 23% above its offering price—just shy of the average gain for 2013 IPOs at this time last year when the average 2013 IPO company had gained 25% from its offering price. Through June 30, the average 2014 IPO has gained 8% from its first day close. At June month-end, 41% of all 2014 IPOs were trading at least 25% above their offering price while almost a third were trading below their offering price.

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

  • Arista Networks, a supplier of cloud networking solutions that use software innovations to address the needs of large-scale Internet companies, cloud service providers and next generation data centers for enterprises, priced above the range and gained 28% on its first day of trading.
  • Radius Health, a biopharmaceutical company focused on developing novel differentiated therapeutics for patients with osteoporosis as well as other serious endocrine-mediated diseases, priced at the expected price and ended its first trading day with a one cent gain.
  • MobileIron, a provider of a mobile IT platform for enterprises to secure and manage mobile applications, content and devices while providing their employees with device choice, privacy and a native user experience, priced within the range and produced a first day gain of 22%.
  • Nordic American Offshore, formed for the purpose of acquiring and operating platform supply vessels with an initial focus of operations in the North Sea, priced at the low end of the range and ended its first day of trading down 5% from its offering price.
  • Trinseo, a leading global materials company engaged in the manufacture and marketing of emulsion polymers and plastics, including various specialty and technologically differentiated products, priced at the high end of the range and gained 7% on its first trading day.
  • Zhaopin, a leading online career platform in China, priced at the midpoint of the range and ended its first trading day up 9% from its offering price.
  • Abengoa Yield, which owns renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, priced above the range and produced a first-day gain of 28%.
  • Aspen Aerogels, an energy technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in large scale energy infrastructure facilities, priced below the range and ended its first day of trading 2% below its offering price.
  • Memorial Resource Development, an independent natural gas and oil company focused on the exploitation, development and acquisition of natural gas and oil properties in the Terryville Complex of North Louisiana, priced an IPO upsized by 19% above the range and ended its first trading day with a gain of 17%.
  • Century Communities, a single-family homebuilder in Colorado, Texas and Nevada, priced at the low end of the range and declined 8% on its first day of trading.
  • Parnell Pharmaceuticals, a fully integrated pharmaceutical company focused on developing, manufacturing and commercializing innovative animal health solutions, priced below the range and ended its first day of trading 20% below its offering price.
  • Signal Genetics, an emerging commercial stage, molecular diagnostic company focused on providing innovative diagnostic services that help physicians make better-informed decisions concerning the care of patients suffering from cancer, priced a downsized IPO at the low end of the range and declined 9% in first-day trading.
  • ZS Pharma, a biopharmaceutical company focused on the development and commercialization of highly selective, non-absorbed drugs to treat renal, cardiovascular, liver and metabolic diseases, priced an IPO upsized by 19% above the range and produced a first-day gain of 58%.
  • Ardelyx, a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative, non-systemic, small molecule therapeutics that work exclusively in the gastrointestinal tract to treat cardio-renal, GI and metabolic diseases, priced an IPO upsized by 19% at the midpoint of the range and ended its first day of trading with a gain of less than 1%.
  • Markit, a leading global diversified provider of financial information services, priced an IPO upsized by 17% at the midpoint of the range and gained 11% on its first trading day.
  • Zafgen, a biopharmaceutical company dedicated to significantly improving the health and well-being of patients affected by obesity, priced an IPO upsized by 20% at the top of the range and produced a first-day gain of 23%.
  • Eclipse Resources, an independent exploration and production company engaged in the acquisition and development of oil and natural gas properties in the Appalachian Basin, priced at the low end of the range and ended its first day of trading down 5% from its offering price.
  • Kite Pharma, a clinical-stage biopharmaceutical company focused on the development and commercialization of novel cancer immunotherapy products designed to harness the power of a patient’s own immune system to eradicate cancer cells, priced an IPO upsized by 25% above an upwardly revised price range and ended its first trading day with a 71% gain.
  • Xunlei, one of the ten largest Chinese internet companies, as measured by user base, that operates a powerful Internet platform in China based on cloud computing to enable users to quickly access, manage and consume digital media content, priced above the range and produced a first-day gain of 24%.
  • Adeptus Health, the owner and operator of First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States, priced at the high end of the range and ended its first trading day 17% above its offering price.
  • Amphastar Pharmaceuticals, a specialty pharmaceutical company that focuses primarily on developing, manufacturing, marketing and selling technically-challenging generic and proprietary injectable and inhalation products, priced below the range and ended its first day of trading with a 25% gain.
  • Imprivata, a leading provider of authentication and access management technology solutions for the healthcare industry, priced at the midpoint of the range and gained 15% on its first day of trading.
  • Materialise, a leading provider of additive manufacturing software and of sophisticated 3D printing services, priced at the low end of the range and ended its first trading day 4% below its offering price.
  • GoPro, a producer of mountable and wearable cameras and accessories, priced at the top of the range and ended its first day of trading 31% above its offering price.
  • ServiceMaster Global, a leading provider of essential residential and commercial services, priced below the range and provided a first-day gain of 6%.
  • TCP International Holdings, a leading global provider of energy efficient LED and CFL lighting technologies, priced below the range and declined 5% on its first day of trading.
  • MOKO Social Media, which develops, manages, and commercializes online mobile social communities for large organized groups, priced at the low end of the range and ended its first trading day with a 3% gain.
  • NextEra Energy Partners, a growth-oriented limited partnership formed by NextEra Energy, Inc. to own, operate and acquire contracted clean energy projects, priced at the high end of an upwardly revised price range and produced a first-day gain of 27%.
  • The Michaels Company, the largest arts and crafts specialty retailer in North America based on store count, priced at the low end of the range and ended its first day of trading with a two cent gain.
  • Minerva Neurosciences, a clinical-stage biopharmaceutical company focused on the development and commercialization of a portfolio of product candidates to treat patients suffering from central nervous system diseases, priced at the expected price and ended its first day of trading with a gain of less than 1%.
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