The U.S. IPO market had its best quarter by proceeds in three years, according to the IPO research company Renaissance Capital.
That kind of momentum has seemingly set the stage for some big names in tech to march onto the public market in the second quarter.
Forty-three companies raised a collective $15.6 billion through their IPOs, says Renaissance, though not all were tech deals. One was the IPO of security company ADT, which had been taken private in early 2016 in a $6.9 billion leveraged buyout by the private equity group Apollo Global Management. As MarketWatch noted at the time of ADT’s January IPO, Apollo continues to own a majority of the company’s shares, meaning it’s a “controlled company” where Apollo is still basically in charge.
Another big, non-tech IPO was that of Hudson, operator of the Hudson “travel essentials” and bookstores found at airports across the U.S. and Canada. Hudson is also a controlled company that remains majority owned by a parent company, Dufry AG of Switzerland. In fact, Dufry earmarked all the proceeds from Hudson’s IPO ($750 million) to pay down its own debt.
Neither of their IPOs performed terribly well. Hudson priced at the low end of its proposed range in January and its shares started to sink almost immediately. ADT’s shares are also trading below their offering price.
As Renaissance notes, three companies that went public and performed much better are the biotechs Menlo Therapeutics and ARMO BioSciences, and the cybersecurity company Zcaler.
Menlo is a seven-year-old, Redwood City, Calif.-based drug developer focused on severe skin itching and chronic cough, and demand for its shares was such that it increased its proposed IPO terms from offering 5.7 million shares at $14 to $16, to offering 6.5 million shares at $16 to $17. Those shares are now trading at roughly $37.
ARMO BioSciences is a four-year-old, Redwood City-based late-stage immuno-oncology company. And it similarly priced its shares above their initial range, owing to demand. The original idea was to sell 6.7 million shares at between $14 and $16; it wound up selling 7.5 million shares at $17. Today, those shares are also trading at around $37.
Both companies went public in January. Meanwhile, Zcaler, a nearly 11-year-old, San Jose, Calif.-based security startup that confidentially filed for an IPO last year, started trading less than two weeks ago at $27.50 per share. Its shares are trading at around the same point as of this writing.
Indeed, biotechs and other tech companies led deal flow, says Renaissance, with 13 and 10 IPOs being staged, respectively.
Some of them were China-based companies, like the video streaming platform iQIYI, which just raised a whopping $2.3 billion in a sale of American depositary shares. (Worth noting: its shares are already dropping in price.)
The market also had a taste of its first, long-awaited tech company, when the cloud-storage firm Dropbox finally IPO’d last week. It was everything its private investors could have hoped for, too. After selling 36 million shares at $21 apiece last Thursday night, its shares soared 36 percent in their first day of trading last Friday.
Dropbox may have been helped along by its investment bankers (they have a way of making these things pop). Either way, if its performance holds up, we can probably expect more splashy debuts in very short order.
Already on deck, of course, is the music streaming service Spotify. The company has filed to sell shares on the public markets this coming Tuesday, April 3.