The U.S. IPO market is set for a busy autumn with no fewer than five companies setting terms for their planned initial public offerings early Tuesday, positioning September for a flurry of activity.
The U.S. market is expected to mark its biggest year measured by proceeds — but not number of deals — since 2014, with at least five, billion-dollar deals expected after Labor Day, according to Renaissance Capital, a provider of institutional research and IPO exchange-traded funds.
Renaissance is expecting 50 to 70 new deals between now and year-end to raise more than $15 billion. That would push 2019 to 170 deals, raising about $60 billion. The number would be higher without the recent stock-market volatility that has kept Chinese issuers away after a strong 2018.
“The calendar is active and we expect this to be the most dollars raised since 2014, and the second best year since the 1990 to 2000 period during the internet bubble,” said Kathleen Smith, principal at Renaissance.
The IPO market has performed strongly in the year to date, with the Renaissance IPO exchange-traded fund
up about 31%, outperforming the S&P 500’s
16% gain and the Dow Jones Industrial Average’s
Positive returns have been driven by the strong performance of some of the ETF’s member stocks including Roku Inc.
which has gained more than 400% year to date and Zscaler Inc.
which is up 72%, offsetting the weak performances of Uber
said Smith. Uber is currently trading 31% below its issue price, while Lyft is about 35% below its issue price.
Among the bigger deals on tap, teeth-straightening startup SmileDirectClub Inc. said early Tuesday that it is aiming to raise up to $1.29 billion in its IPO by selling 58.5 million shares priced at $19 to $22 a pop. The Nashville-based company will use the proceeds of the deal to pay bonuses, redeem LLC units from pre-IPO investors and to fund a dividend to those investors, with the rest to be spent on general corporate purposes, according to the company’s prospectus. The company is planning to list on Nasdaq under the ticker symbol “SDC.”
SmileDirect’s model involves shipping clear aligners directly to customers, whose progress is then monitored remotely by licensed dentists or orthodontists. Customers either go to a so-called SmileShop and get a free 3-D image taken of their teeth or buy a kit online to make an impression of their teeth to mail to SmileDirectClub. A dental professional then reviews the information and prescribes aligners if appropriate.
That deal is expected to land next week, which may put it ahead of the IPO of WeWork’s parent, The We Co.
which will be at least a billion dollars, according to its last filing with the SEC. That sum is likely a placeholder until the company sets terms. The office-space-sharing company is planning to list three classes of stock that carry different voting rights, ensuring that co-Founder and Chief Executive Adam Neumann will control most of the voting power once the deal is closed.
Among the risk factors for that company are its long-term lease commitments of nearly $50 billion and the fact it is still posting significant losses.
Peloton Interactive Inc.
the provider of interactive exercise machines and fitness classes, has said it aims to raise at least $500 million in its IPO. The company sells exercise bikes and treadmills and streams fitness classes to those devices through a touch screen included with the machines. It commands a premium price of thousands of dollars for its fitness bikes and $40 a month for a subscription to its classes, over 40% more than it costs to produce both the hardware and content.
Peloton has more than half a billion dollars in losses since it was formed in 2012, although revenue has doubled to more than $900 million in its fiscal year to end June.
Meanwhile, Endeavor Group Holdings Inc. is expected to pursue its planned IPO sometime in the fall, according to Smith. That deal was pushed back after Wanda Sports Group Co.’s
July IPO flopped, with the stock down 34% from its issue price.
Endeavor combines a talent agency with the world’s biggest mixed-martial-arts organization, UFC, and a range of other assets. The company is planning to list on the New York Stock Exchange, under the ticker symbol “EDR.” The company has long-term debt of $4.6 billion and total liabilities of $7 billion, according to its prospectus.
“Wanda Sports is its closest peer with a similar business model of owning sports events and media rights,” Smith said. “Endeavor is a challenge for some people. It is a complicated business and highly leveraged.”
Separately, Cloudflare, a cloud-based network platform that promises security, enhanced performance of business-critical applications, and “eliminating the cost and complexity of managing individual network hardware,” said it plans to offer 35 million shares priced at $10 to $12 each, raising $420 million at the top of that range.
The company is planning to list on the NYSE, under the ticker symbol “NET.”
Rounding out the coming parade of IPOs are 10x Genomics, IGM Biosciences, and Satsuma Pharmaceuticals Inc.
10x Genomics said it plans to offer 9 million shares priced at $31 to $35 each, raising $315 million at the top of that range. The life science technology company is planning to list on Nasdaq under the ticker symbol “TXG.” IGM Biosciences
is planning to offer 7.8 million shares in its IPO, priced at $15 to $17 each. The company would raise $132.6 million at the top of that range. IGM is planning to list on Nasdaq, under the ticker symbol “IGMS.” Satsuma
which specializes in migraine treatments, said it will offer 5 million shares in its IPO priced at $14 to $16 each, raising up to $80 million. The San Francisco-based startup is planning to list on Nasdaq, under the ticker symbol “STSA.”