After the customary lull surrounding the Labor Day holiday, the IPO market was reignited by a stream of IPOs over the second half of September. The month ended with 17 IPOs. Buoyed by Alibaba's $21.77 billion offering, gross proceeds in September reached $28.08 billion—the second highest monthly gross proceeds figure in history, trailing only the $33.66 billion tally in November 1999.
September's activity brings the count for the first three quarters of 2014 to 186 IPOs, 54% above the 121 IPOs over the first three quarters of 2013 and surpassing the full-year 2013 tally of 178 IPOs.
The 54 IPOs in the third quarter of 2014 represented the first quarterly decline since the third quarter of 2012, although an easing of the torrid pace of the past two years was inevitable at some point. The quarter's tally, however, was the second highest Q3 total since 2000 (the third quarter of 2005 produced 58 IPOs).
With the Alibaba IPO now enthroned as the largest IPO in history, gross proceeds for the first three quarters of 2014 have reached $64.30 billion, or 56% above the full-year 2013 tally of $41.27 billion, and represent the third highest annual total in history behind only the $94.82 billion in 1999 and $108.13 billion in 2000.
Life sciences IPOs continued to flow in September, with seven more, bringing the sector's total for the first three quarters of 2014 to 79 IPOs—a count now one above the previous three years combined.
The median IPO offering size declined 14% from $107.4 million in full-year 2013 to $92.7 million in the first three quarters of 2014—the lowest median offering size since the $89.3 million figure for 2004. The median offering size for life sciences IPOs declined from $68.6 million for full-year 2013 to $56.0 million over the first three quarters of 2014. While the median offering size for non-life sciences IPO companies declined from $187.0 million in 2013 to $125.0 million in the first three quarters of 2014, the 2014 figure was in line with the $124.3 million median figure for non-life sciences IPO companies for the five-year period preceding 2013.
With the typical life sciences IPO company yet to generate significant revenue or reach profitability, median annual revenue and the percentage of profitable IPO companies declined for the second consecutive year. The median annual revenue for IPO companies fell from $133.6 million in 2012 to $89.9 million in 2013 and fell further to $59.6 million in the first three quarters of 2014—the lowest level since 2000. The percentage of profitable IPO companies declined from 55% in 2012 to 43% in 2013 and to 35% in the first three quarters of 2014. The median life sciences IPO company in 2014 had revenue of only $1.2 million, with just 15% being profitable.
The average IPO company in 2014 ended its first day of trading with a 15% gain compared to an average first-day gain of 21% for IPOs in all of 2013. The IPO market, however, remains selective with positive first-day returns far from guaranteed. Year-to-date, 26% of IPOs were "broken" (closing below the offering price on the first day)—above the 22% of broken IPOs in 2013 and representing the third-highest figure in the last 15 years.
Aftermarket performance for the average IPO over the first three quarters of 2014 has been essentially flat. The average IPO company in the first three quarters of 2014 gained only 0.3 from its first-day closing price through the end of September. The dichotomy between life sciences and all other IPO companies in 2014 continues, with the average life sciences IPO company posting an average decline of 4% from first-day close to September month-end while other IPO companies gained an average of 4% from first-day close, still lagging the annual gains in the major market indices.
The best performance continues to come from venture-backed non-life sciences companies, with the average VC-backed non-life sciences IPO company in 2014 producing a gain of 29% from its offering price through the end of September. However, on average, all but 5% of this gain came on the first day.
At September month-end, 42% of all 2014 IPOs were trading below their offering price—51% of all 2014 IPOs trading below their first-day close.
IPO activity in September consisted of offerings by the following companies listed in the order they came to market:
- Affimed Therapeutics, a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies, priced an IPO upsized by 28% below the range and declined 19% in first-day trading.
- ReWalk Robotics, an innovative medical device company that is designing, developing and commercializing exoskeletons that allow wheelchair-bound individuals with mobility impairments or other medical conditions the ability to stand and walk once again, priced an IPO downsized by 10% below the range and produced a first-day gain of 113%—the first "moonshot" (an IPO that doubles in price on its opening day) since March and fifth of the year.
- Civitas Solutions, a provider of home- and community-based health and human services to must-serve individuals with intellectual, developmental, physical or behavioral disabilities and other special needs, priced below the range and ended its first trading day down 2%.
- Tokai Pharmaceuticals, a clinical-stage biopharmaceutical company focused on developing novel proprietary therapies for the treatment of prostate cancer and other hormonally-driven diseases, priced an IPO upsized by 20% at the high end of the range and jumped 58% from its offering price in first-day trading.
- Foamix Pharmaceuticals, a clinical-stage specialty pharmaceutical company focused on developing and commercializing its proprietary minocycline foam for the treatment of acne, impetigo and other skin conditions, priced an IPO upsized by 13% below the range and produced a first-day gain of 4%.
- ProQR Therapeutics, an innovative biopharmaceutical company engaged in the discovery and development of RNA-based therapeutics for the treatment of severe genetic disorders, with an initial focus on Cystic Fibrosis, priced an IPO upsized by 20% at the high end of the range and gained 13% on its first trading day.
- Alibaba, the largest online and mobile commerce company in the world, priced at the high end of an upwardly revised price range, making it the largest IPO ever, and posted a first-day gain of 38%.
- Grupo Aval Acciones y Valores, Columbia's largest banking group, raised the expected amount of gross proceeds and gained less than 1% in first-day trading.
- Citizens Financial Group, the US banking arm of RBS, priced below the range and produced a first-day gain of 7%.
- CyberArk Software, a provider of a new layer of IT security solutions that protects organizations from cyber attacks that have made their way inside the network perimeter to strike at the heart of the enterprise, priced above the range and ended its first trading day with a 87% gain.
- Israel Chemicals, a leading specialty minerals company, priced in line with expectations and produced a first-day gain of 2%.
- Medley Management, an asset management firm, priced below the range and declined 9% on its first day of trading.
- Smart & Final Stores, a value-oriented food retailer serving a diverse demographic of household and business customers, priced at the low end of the range and ended its first trading day with a one-cent gain.
- Vitae Pharmaceuticals, a clinical-stage biotechnology company focused on discovering and developing novel, small molecule drugs for diseases that represent large market opportunities where there are significant unmet medical needs, priced an IPO upsized by 38% below the range and ended its first day of trading down 5% from its offering price.
- Travelport Worldwide, a leading travel commerce platform providing distribution, technology, payment and other solutions for the $7 trillion global travel and tourism industry, priced at the high end of the range and produced a first-day gain of 2%.
- Vascular Biogenics, a clinical-stage biopharmaceutical company committed to the discovery, development and commercialization of first-in-class treatments for cancer and immune-inflammatory diseases, priced at the expected price and ended down 3% in first-day trading.
- Vivint Solar, an installer of residential solar energy systems, priced at the low end of the range and ended its first trading day with a gain of one cent.