August 2016 IPO Market Review

by WilmerHale

The IPO market continued its tepid pace in August, with the month producing seven IPOs. Over the first eight months of 2016, the tally of 54 IPOs represents less than half the number of IPOs over the first eight months of 2015 and less than one-third the number of IPOs for the same period in 2014.

Gross proceeds in August were $932 million, bringing gross proceeds over the first eight months of 2016 to $9.66 billion, or 45% less than the $17.51 billion in gross proceeds over the first eight months of 2015.

IPOs by emerging growth companies (EGCs) have accounted for 81% of the year’s IPOs, down from 85% of the total number of IPOs in the period between enactment of the JOBS Act enactment in 2012 and the end of 2015.

Life sciences companies have accounted for half of the year’s new offerings, up from 47% in 2015 and 40% in 2014.

The median IPO offering size over the first eight months of 2016 was $90.5 million, just shy of the $91.7 million median for all IPOs in 2015. The median life sciences company IPO offering size in the first eight months of 2016 was $55.0 million, down 23% from the $71.8 million median in 2015, while the median non-life sciences company IPO offering size was $130.0 million, up 1% from the $128.5 million median for 2015.

The median annual revenue of IPO companies through the first eight months of 2016 was $60.6 million, or 60% above the $37.8 million median for 2015, but well below the $92.7 million median for the five-year period from 2010 to 2014.

Only a pair of companies that went public in August were profitable. Over the first eight months of 2016, 37% of IPO companies have been profitable, compared to 30% in 2015 and 36% in 2014—both figures well below the 54% that prevailed over the five-year period preceding 2014.

Over the first eight months of 2016, only two life sciences IPO companies were profitable. In contrast, two-thirds of non-life sciences IPO companies have been profitable in this period, compared to the 55% figure that prevailed over the five-year period that preceded 2016.

Year to date, the average IPO has produced a first-day gain of 9%, compared to average first‑day gains of 16% in 2015 and 14% in 2014, and representing the lowest such figure since 2002. The average life sciences IPO company over the first eight months of 2016 gained 5% in first-day trading, compared to 13% for all other IPO companies.

In the first eight months of 2016, 26% of IPOs have been “broken” (IPOs whose stock closes below the offering price on their first day), equal to the percentage of broken IPOs in 2015 and down slightly from the 27% figure for 2014.

At August month-end, the average IPO company was trading 32% above its offering price, 17% of companies were trading below their offering price and 24% were trading below their first-day closing price. Through August, the average 2016 life sciences IPO company was trading 13% above its offering price, while the average non-life sciences IPO company had almost quadrupled its first-day gain to end the month 51% above its offering price.

IPO activity in August consisted of offerings by the following companies listed in the order they came to market:

  • At Home Group, the leading home décor superstore based on the number of its locations and its large format stores, priced at the midpoint of the range and was flat in first-day trading.
  • First Hawaiian, a bank holding company headquartered in Honolulu, Hawaii and the state's largest full service bank as measured by assets, loans, deposits and net income, priced at the high end of the range and produced a first‑day gain of 5%.
  • Gemphire Therapeutics, a clinical-stage biopharmaceutical company focused on developing and commercializing therapies for the treatment of dyslipidemia, a serious medical condition that increases the risk of life threatening cardiovascular disease, priced below the range and ended its first day of trading down 8% from its offering price.
  • Atomera, a company engaged in the business of developing, commercializing and licensing proprietary processes and technologies for the $350+ billion semiconductor industry, priced at the expected price and gained 8% on its first trading day.
  • Medpace Holdings, one of the world’s leading clinical contract research organizations by revenue, solely focused on providing scientifically-driven outsourced clinical development services to the biotechnology, pharmaceutical and medical device industries, priced at the high end of the range and ended 21% above its offering price in first-day trading.
  • Protagonist Therapeutics, a clinical-stage biopharmaceutical company with a proprietary technology platform focused on discovering and developing peptide-based new chemical entities (NCEs) to address significant unmet medical needs, priced an upsized IPO at the midpoint of the range and ended its first day of trading down 3% from its offering price.
  • Airgain, a leading provider of embedded antenna technologies used to enable high performance wireless networking across a broad range of home, enterprise, and industrial devices, priced below the range and was flat in first-day trading.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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