Following a pause for the Independence Day holiday, July produced a steady flow of new offerings and ended the month with 16 IPOs—comfortably above the nine IPOs in July 2012 and equal to the July total in both 2005 and 2007. There have been 86 IPOs in the first seven months of 2013—up 13 (18%) from the 73 in the first seven months of 2012, but 23% below the 111 IPOs in the first seven months of 2007, the recent high point of the IPO market.
July’s gross proceeds of $2.56 billion were the highest July tally since the $5.30 billion in July 2007. Gross proceeds for the first seven months of 2013 were $19.42 billion.
The IPO market remains dominated by emerging growth companies (EGCs), with 77% of all IPOs in the first seven months of 2013—similar to the 76% market share for EGC IPOs in 2012 following the enactment of the JOBS Act in April 2012.
Life sciences companies produced six IPOs in July, bringing the year-to-date total to 28—almost a third of all IPOs and twice the number of life sciences IPOs in both full-year 2011 and 2012. VC-backed and PE-backed company IPOs accounted for 42% and 31%, respectively, of all IPOs in the first seven months of the year.
The median deal size of $101.7 million for the first seven months of 2013 was 8% higher than the $94.3 million median in full-year 2012. The median deal size for VC-backed companies was $78.4 million—the lowest level since the $72.0 million median in 2006—while the median deal size for non-VC backed companies was $219.9 million—a third higher than the 2012 figure. The median deal size for EGCs, at $79.7 million, was less than a fifth of the $419.1 million median deal size for other companies.
The median annual revenue of all IPO companies in the first seven months of 2013 was $76.3 million, 43% below the median annual revenue of $133.6 million for IPO companies in 2012 and the lowest level since the end of the dot-com bubble in 2000. The median annual revenue of EGCs going public in the first half of 2013 was $48.9 million, compared to $2.36 billion for other companies.
With life sciences and technology-related companies accounting for 63% of all IPOs in the first seven months of 2013—up from 58% for full-year 2012—it comes as little surprise that the percentage of profitable companies going public has drifted down from 55% in 2012 to 43% in 2013 to date.
The average IPO company in the first seven months of 2013 enjoyed a 17% first-day gain from its offering price—just above the 16% average first-day gain for full-year 2012. In the first seven months of the year, 25 companies—29% of the total—produced a first-day gain of at least 25%. Nine IPOs, including four by life sciences companies, saw a first-day gain of at least 50%. On the other end of the spectrum, 22 IPOs—just over a quarter of the total—have been “broken” (IPOs whose stock closes below the offering price on their opening day), compared to 20% in all of 2012. In a potential sign that the IPO market is becoming more selective, seven of July’s IPOs were broken and another two were flat on their first trading day.
At the end of July, the average 2013 IPO was trading 37% above its offering price and 52% of the year’s IPOs were trading at 25% or more above their offering price—including 36% that were up more than 50% from their offering price. Overall, 71% of the year’s IPOs were trading above their offering price at the end of July , with another company (Omthera Pharmaceuticals) having been acquired at a 59% premium to its IPO price. Unlike a number of the recent years, in which much of the aftermarket gain stemmed solely from the first-day pop, the average IPO in the first seven months of 2013 has gained 17% from its first-day close to July month-end.
July IPO activity consisted of offerings by the following companies listed in the order they came to market:
- NRG Yield, a company formed by NRG Energy to own, operate and acquire contracted renewable and conventional generation and thermal infrastructure assets, priced above the range and saw a first day gain of 24%.
- OncoMed Pharmaceuticals, a biopharmaceutical company focused on discovering and developing first-in-class monoclonal antibody therapeutics targeting cancer stem cells, priced an IPO upsized by 20% above the range and gained 60% in its market debut.
- UCP, a homebuilder and land developer in Northern California and Puget Sound, Washington, priced at the low end of the range and declined 7% on its first day of trading.
- Diamond Resorts International, a timeshare company with more than 490,000 members and 296 global destinations, priced below the range and saw a 15% first-day gain.
- RetailMeNot, which operates the world’s largest digital coupon marketplace, priced at the midpoint of the range and gained 32% on its first day.
- Agios Pharmaceuticals, a biopharmaceutical company using its expertise in the field of cellular metabolism to develop treatments for cancer and inborn errors of metabolism, priced an IPO upsized by almost 18% above the range and jumped 74% on its first day—the fourth best first day gain of the year and the best first-day gain for a life sciences IPO since 2000.
- Peru-based Graña y Montero, that country’s largest engineering and construction company, priced an IPO upsized by 20% within the range and ended its first day of trading flat.
- Heat Biologics, a biopharmaceutical company engaged in the development of cellular therapeutic vaccines for cancer therapy, priced a twice-upsized IPO at the low end of the range and declined 4% on its first day of trading.
- Jones Energy, an independent oil and gas company engaged in the development, production and acquisition of oil and natural gas properties in the Anadarko and Arkoma basins of Texas and Oklahoma, priced a downsized IPO below the range and declined 8% on its first day.
- Cellular Dynamics International, a developer and manufacturer of fully functioning human cells in industrial quantities, priced at the low end of the range and fell 21% on its first day.
- Conatus Pharmaceuticals, a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease, priced an IPO upsized by 20% at the middle of the range and declined 14% on its first day of trading.
- Onconova Therapeutics, a biopharmaceutical company focused on discovering and developing novel small molecule drug candidates to treat cancer, priced an IPO upsized by 12% above the range and saw a first day gain of 33%
- WCI Communities, a private equity–backed lifestyle community developer and luxury homebuilder in coastal Florida, priced an IPO downsized by 19% at the low end of a downwardly revised range and saw a first day gain of 1%.
- Liquid Holdings Group, a provider of an integrated, on-demand software platform for small hedge funds, priced an IPO downsized by 24% at the low end of the range and declined 15% on its first day.
- Private equity–backed Ardmore Shipping, which provides worldwide seaborne transportation of petroleum products and chemicals, priced below the range and declined 4% of its first day.
- Sprouts Farmers Markets, a private equity–backed operator of over 160 natural and organic grocery stores in seven southwestern states and California, priced above the range and was the second “moonshot” of 2013, ending its first day of trading up 123%.