November IPO issuance followed the same path as the past two months where the IPO market grounded to a halt. There were only four deals, raising a combined $166 million. The largest were $50+ million IPOs, biotech Acrivon Therapeutics (ACRV) and Chinese hotel chain Atour Lifestyle Holdings (ATAT). The four deals averaged a -13% return from the offer price. it’s been a dismal year for IPOs. October with just two IPOs was the slowest October for the IPO market since 2011. The third quarter was the worse for new issuers in over a decade.
The pipeline saw 13 additions, of these four companies are planning to raise $100+ million, as well as updates from several large issuers already filed. Just one blank check IPO raised $50 million and 10 companies listed via SPAC merger. With te morose stock market terminations and liquidations continued to roll in.
Issuers not included is because the company offered units with warrants attached and priced at a market cap less than $50 million, they will be excluded from Renaissance Capital’s 2022 IPO stats.
IPO returns have been at the brunt of risk on/risk off moves in the general bond and stock markets. The IPO Index lost 1%, compared to the S&P 500’s 5% gain. The IPO market is now in the final month of 2022, representing the last chance for companies to go public before year end. We will wait to see if there are any notable December IPOs.
November 2022 IPO Week’s in Review
Acrivon Therapeutics (ACRV)
Precision oncology biotech Acrivon Therapeutics (ACRV) offered more shares and priced well below the range to raise $94 million at a $277 million market cap. The company also raised $5 million in a concurrent private placement and added insider indications at pricing covering 88% of the deal. The company’s lead candidate is in a potentially registrational Phase 2 trial across multiple tumor types, focusing on platinum-resistant ovarian, endometrial, and bladder cancers, with initial readouts expected in the 2H23. Their AP3 platform enables the creation of drug specific proprietary OncoSignature companion diagnostics that are used to identify the patients most likely to benefit from our drug candidates, which we refer to as patient responders.
- Underwriters: Roth Capital, The Benchmark Company
- Headquarters: Watertown, MA
- Founded: 2018
- Employees 42
- Website: Home – Acrivon
Acrivon Closed Up 26% in issuance week
Atour Lifestyle Holdings(ATAT)
Chinese hotel chain Atour Lifestyle Holdings (ATAT) priced at the low end to raise $52 million at a $1.5 billion market cap. The company franchises and manages a portfolio of upper midscale hotels aimed at young, affluent consumers. It has remained profitable despite COVID-related headwinds in China, which have been and are expected to remain unpredictable.
They have their ‘‘A-Card’’ loyalty program with strong customer stickiness. They built their A-Card loyalty program to enhance engagement with guests and provide them with a unique and personalized experience. As of June 30, 2022, our A-Card loyalty program had amassed 32 million registered individual members.
- Underwriters: Roth Capital, The Benchmark Company
- Headquarters: Shanghai, China
- Founded: 2013
- Employees 3145
- Website: Investor Relations | Atour Lifestyle Holdings Limited (yaduo.com)
Snail Closed Up 17% in issuance week
Filings Monitor for November
Possible 2023 IPOs on tap
The success of larger IPOs like Mobile Eye in October shows that there is still investor demand for companies that are in dynamic, rapidly growing markets. With that in mind, other unicorns could go public in 2023 if the IPO window opens up again.
Crypto king FTX was one being hyped, well we know how that wait, what ended in the fastest $10 billion plus wipeout we can recall in a clear case of fraud and disgraceful financial criminal negligence. This will affect other hyped companies. Prior to the FTX collapse sports merchandise leader Fanatics, Fortnite owner Epic Games and mobile bank app Chime were among the top 2023 IPO candidates, according to Wall Street analysts.
But IPOs for the two most valuable startups on the planet seem less likely.
TikTok owner ByteDance may be worth $140 billion, according to research firm CB Insights, but a stock listing (in the US at least) probably won’t happen anytime soon given the economic tension between the Biden administration and China regarding export restrictions for American made semiconductors. Chinese firms may choose to go public in Hong Kong or Shanghai instead of New York.
Publicly traded Chinese companies have also been put under more scrutiny by US regulators this year. The SEC investigated the IPO of China’s ride hailing app Didi, for example.
And then there’s SpaceX. The Elon Musk-led space exploration firm is worth $127 billion, according to CB Insights. But Musk has pretty much ruled out an IPO of the entire company.
The Tesla (TSLA) CEO and new Twitter owner has reportedly suggested, though, that an IPO of SpaceX’s Starlink satellite internet business could take place…but not until 2025 at the earliest.
So investors hungry for another mega unicorn like Uber (UBER), electric truck maker Rivian or Airbnb to go public anytime soon may need to keep waiting for awhile.
Over a third (9) the September quarter’s IPOs were of Chinese companies listing in the U.S. This followed China’s audit agreement with the U.S. in August. Hong Kong-based fintech AMTD Digital was the third biggest IPO of the quarter, raising $125 million. The worst was also a Chinese company, e-commerce play WeTrade Group, which Renaissance said fell more than 96 percent after a “triple-digit debut.”
The drought has seen companies like Klarna Bank AB forced to raise money privately at significantly lower valuations. We have seen acquisitions rather than going to market. An example of this was collaboration software company Figma being bought for $20 billion by Adobe Inc. IPO candidates looking to go public will need to be well prepared when re-engaging the market as they will face much lower valuations compared with the highs of 2021.
Banks profits are sharply down. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., three of the leading IPO underwriters, all reported sharply lower investment-banking revenues in the second quarter. Perhaps the biggest impact is on Credit Suisse who were big in this space also.
September Quarter IPO Activity
July was very quiet for IPO’s after the miserable first half of the year for US stocks. However, July saw a rebound which no doubt brought about the rebound in August IPO issuance. Following the destruction that was June, July was a complete reversal for the major US stock indices which had their best month of the year. The NASDAQ was the standout rising 12.35% for the month. The Dow industrial average rose 6.73% and the S&P index rose 9.12% which was the best month since November 2020. A difference a month makes, the S&P 500 fell 20.6% through January to June 30, 2022, suffering its worst first half of a year since 1970 when it declined 21.0%.
Renaissance Capital said August IPOs averaged a return of over 1,000% from offer due to the first day of trading for uplisting Addentax Group, ATXG soared 13,031% from the offer price. Excluding that outlier, the other 11 averaged a -2% loss as explosive first-day gains were offset by heavy aftermarket losses.
The Renaissance Capital IPO Index finished with a -2% loss in August, outperforming the S&P 500’s -4% decline; the IPO market started the month strong before selling off in the second half of the month as did the broader markets, accelerating after Fed Chair Powell’s policy speech with uncompromising inflation resolve at the Jackson Hole Economic Policy Symposium spiked the bear market or short covering rally.
August saw four blank check IPOs raise $312 million in August, and eight companies listed via SPAC merger. There were nine additions to the pipeline in August, led by a $150 million filing from a VC-backed biotech.
IPO interest is on pace for its worst year in decades after the market crashing the IPO market has been in the doldrums. New companies have few options but to burn through cash while they wait for the stock market to calm.
“The IPO market is on pace for its worst year in decades, leaving fledgling companies with few options but to burn through cash while they wait for the stock market to calm. Late last year, hundreds of companies were in the final stages of preparing to go public, encouraged by the best 18 months ever for U.S. initial public offerings. Then a combination of factors—sky-high inflation, rising interest rates and Russia’s invasion of Ukraine—sent shock waves through the stock market. The IPO pipeline froze. So far this year, traditional IPOs have raised only $5.1 billion all told, Dealogic data show. Typically, at this point in the year, traditional IPOs have raised around $33 billion… Last year at this point, these offerings raised more than $100 billion.”
August 22 – Wall Street Journal (By Corrie Driebusch)
Warrants
Over the last month, a rising number of small deals have opted to offer warrants in their IPOs, either at the time of the initial filing or in a later amendment. In the context of an IPO, warrants give investors the right to purchase a new issuer’s stock at a specific price within a set time frame. That price is usually equal to or slightly greater than the offer price, and the time frame is often within five years after the IPO.
Warrants allow new issuers to both sweeten the pot for investors and provide an additional source of capital for themselves.
While offering warrants may help small deals get done in challenging conditions, it does not provide immunity from poor trading. From 2021 to date, issuers that have gone public after adding warrants are mostly underwater, averaging a -54% return from IPO.
Recent filers that have opted to offer warrants are all micro-caps and span a variety of industries. The group includes both companies filing for fresh listings, as well as those hoping to uplist from the OTC. Non-listed filers feature ramen restaurant chain Yoshiharu Global, Canadian psychotropics company Lucy Scientific Discovery, aquaculture company The tru Shrimp Companies, short-term rental provider CorpHousing Group, and agtech developer Opti-Harvest.
Source: Renaissance Capital
From The TradersCommunity Research Desk