IPO Lookout: Can a $200 Million IPO Be The Answer After a Lackluster Week?

Last week, IPOs were set to dominate the landscape with a whopping 23 new issues but only 65 percent of those set to open for trading actually made it to market. This week, ten new issues are on the docket with three of them being last week’s leftovers, which might be good for investors.

The incredible number of IPOs combined with a shaky stock market distracted investors from buying IPOs. The Dow Jones entered negative territory for the year, while the S&P slumped 2.6 percent.

IPOs like Avalanche Biotechnologies AAVL and Mobileye MBLY battled hard, posting 48 percent returns each to IPO investors by 4 p.m. Friday. Despite their successes, IPO investors on the whole saw an abysmal gain of 1.2 percent for the week.  Secondary market buyers, who buy and hold each issue until the end of the week found themselves in more pain, dropping 5.75 percent.

Secondary investor wounds were the result of biotechnology companies with no revenue like Israeli Bio Plast Pharma ORPN and Macrocure MCUR. From respective IPO pricing, the companies fell 37 and 25 percent.

This Week in IPOs

A smaller list for the week of August 4, brings with it smaller IPOs.  The largest IPO expected for the week is Ryerson RYI.  At the top end of its range it will fetch $220 million in proceeds, not a paltry sum, but not even close to playing in the same ball park as last week’s $3 billion Synchrony Financial SYF.

Ryerson is a leading processor and distributor of metals in North America. More than half of the 70,000 products processed and distributed by Ryerson are made to meet customer requirements. Its customer base ranges from mom and pop independently owned machine shops to large, international equipment manufacturers, handling a variety of metals from stainless steel, aluminum, carbon steel, and other alloys. 

The company believes that if it can expand gross margins, it will be poised to profit when industry volume accelerates. 

Gross margins between 2012 and 2013 increased by to 17.9 percent from 17 percent, but net sales decreased 14 percent over that same time period.

Its three component strategy is to improve operating efficiency, pursue growth through value added acquisitions and to keep a tight financial ship by maintaining a strong liquidity and capital structure position. 

Proceeds from the offering will be used to redeem $105 million in outstanding debt due in 2018, $42 million of a $1.35 billion revolver, and $25 million to Platinum Advisors.

Offerings for the Week of August 4, 2014

Tuesday, August 5

·   Tobira Therapeutics TBRA: 4.6 million shares expect to price between $12 and $14 through BMO, JMP Securities, and Oppenheimer.

Thursday, August 7

·   Hoegh LNG Partners HMLP: 9.6 million shares expect to price between $19 and $21 through Citigroup, Bank of America Merrill Lynch, and Morgan Stanley.

·   Ryerson RYI: 11 million shares expect to price between $17 and $20 through Bank of America Merrill Lynch, Deutsche Bank, and BMO Capital.

·   T2 Biosystems TTOO: 4 million shares expect to price between $15 and $17 through Goldman Sachs and Morgan Stanley.

·   iDreamSky DSKY: 7.7 million ADSs expect to price between $12 and $14 through Credit Suisse, J.P. Morgan, and Stifel.

Friday, August 8

·   Green Bancorp GNBC: 9.6 million shares expect to price between $19 and $21 through Citigroup, Bank of America Merrill Lynch, and Morgan Stanley.

·   Independence Contract Drilling ICD: 10 million shares expect to price between $14 and $16 through Morgan Stanley, RBC, Tudor, Pickering, and Holt.

Uncertain Timing

·   Auris Medical EARS: 6.9 million shares expect to price between $10 and $12 through Jefferies and Leerink.

·   GWG Holdings GWGH: 1.6 million shares expect to price between $11.50 and $13.50 through MLV.

·   Zosano Pharma ZSAN: 6.4 million shares expect to price between $10 and $12 through Wedbush.

Disclosure:  At the time of writing, the author holds no positions in the mentioned securities.