- Six tech IPOs held in August yielded more than 40% return from proposed price.
- Biotech boom is expected to continue as more companies led by Acelity, which is expected to raise $1B, file for IPO.
- Line postponed IPO, and an internal Uber document suggested the company is planning to go public in 2017.
- Chinese food delivery app Ele.me raised $630M in the biggest funding round of the week.
The IPO Recap
Welcome back to Amigobulls' tech IPO news weekly. Another volatile week in the global markets had its impact on the IPO market, as no company went public in the previous week. As August is historically a weaker month in the IPO industry, the unrest in the markets is a terrible environment in which to go public, and most companies would prefer to postpone than go public in the middle of a sell-off. Only 14 companies went public this month, raising more than $700M mainly in the biotech sector where only Sunrun, residential solar electricity provider, is a non-biotech firm. Even though a small number of IPOs took place in August, this is the same number of IPOs that took place in August 2014, which might put the impact of the global sell-off on the IPO market in proportion.
Note: You might be interested in Amigobulls tech IPO coverage.
As shown in the table below, the average return for IPOs held in August 2015 from the price proposed in the prospectus is more than 40%, and return on the opening price drops to 12.6%. These are impressive figures when compared to the leading IPO investing ETFs, First Trust US IPO ETF (FPX) that yielded -6% in August and Renaissance IPO ETF (IPO) that produced -8% in August.
The IPO Week Ahead: August 31
Since the beginning of the year, biotech companies accounted for 44% of the total IPOs, and that biotech IPO trend is expected to continue after additional biotech companies filed for IPOs seeking to raise exceptional amounts: Acelity filed for IPO planning to raise $1B; Surgery Partners filed for $431M; Edge Therapeutics and Penumbra filed for $115M. These companies have not set a date nor priced their IPO shares yet. In case there are any developments regarding these filings or other significant developments in the week’s IPO calendar, I will update it in the comments section below.
IPO Market Events
The popular Asian instant messaging app Line, which many speculated would go public during 2015, decided to postpone its IPO plans following the current instability of the equities market worldwide. The company’s spokeswoman told the Wall Street Journal: “The global market is currently unstable, and we cannot talk about anything definite regarding the timing of a Line IPO. Regarding future prospects, we will make a decision based on market conditions and the evolution of our business performance.”
Postponing the expected IPO will probably impact the company’s plan to expand globally after successfully penetrating some major Asian markets like Japan, South Korea, Thailand, Indonesia, Malaysia, and Vietnam but failing to grasp most of the Western countries that are still dominated by Facebook’s (NASDAQ:FB) WhatsApp and Messenger and failing to penetrate the Chinese market, which is dominated by WeChat from Tencent (OTC:TCEHY).
After Uber China was rumored to go public in the local stock exchange, an internal Uber Document that was leaked to Reuters reveals that Uber Global expected to go public (probably in New York) during 2017. The document also states that Uber kept 20 percent of its booking revenue and is expected to generate roughly $2B in revenues in 2015. A spokeswoman of Uber in San Francisco said this to Reuters: “The company does not comment on rumors and speculations.” Expected revenues of $2B with a company valuation of $51B of a Series F round reflects a steep 25 P/S ratio for the ride-hailing service. A further analysis of Uber financials and IPO will be available on Amigobulls later this week.
Private Market Developments
These are the exceptional transactions worth mentioning in the private equity market from the previous week:
- Ele.me – The Chinese online food ordering app Ele.me raised $630M from Sequoia Capital and a number of Chinese investors, which include CITIC, Hualian, Tencent, and JD.com (NASDAQ:JD). With the proceeds of the current round, Ele.me has now raised a total of $1.1B in 6 rounds during only four years with $900M raised just this year.
- Fanatics – The online retailer of sports merchandise, Fanatics, raised $300M from PE fund Silver Lake Partners. The once brick-and-mortar store in Jacksonville, FL, was later spun-off from eBay into a privately held company called Kynetic, which owns other e-commerce sites. Fanatics power the e-commerce sites of all professional sports leagues in the U.S. including the NFL, the MLB, the NBA, the NHL, NASCAR, and more. It is part of Wall Street Journal’s unicorn list with a valuation of $3B.
- Coursera – The online learning startup, Coursera, raised $50M from New Enterprise Associates, International Finance Corporation, Kleiner Perkins Caufield & Byers, and Times Internet. Coursera offers many online courses in a variety of topics, and some are in partnership with academic institutions like the latest “Bitcoin and Cryptocurrency Technologies” course by Princeton University. The company raised $130M in total from April 2012 and is perceived as an e-learning market leader.
Disclosure: The information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer's opinion about the companies mentioned in the article. Investors should conduct their due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.