We chose the candy this month carefully because it conveys an important change in how the IPO market works. The one provision of the JOBS act that companies have embraced is the ability to file secretly and avoid public visibility until shortly before reaching out to investors. According to a recent study by Ernst and Young, nearly 75% of companies filing are exploiting the rule in the JOBS act that allows firms with less than $1B in revenue to be classified as “emerging growth” companies. Some 59% of these companies have used the confidential filing option. At the most fundamental level these changes make the IPO process better for companies and slightly less beneficial for investors. Confidential filings allow companies to be more “opportunistic” when conditions are favorable and avoid the stigma that sometimes comes from having a long delay between filing and beginning the marketing process.
Having said that, we did have a fairly healthy 14 new IPO filings in February. Some of the highlights include:
Quintiles Transnational: With nearly $5B in revenue and $400M in operation profit, this provider of development and outsourced services for pharma companies is a big one. Quintiles has 13 banks on the cover of their $600M IPO. Masonite International: This maker of residential doors is another play on the recovery of the US real estate market. The company has revenues of $1.6B but margins are lousy and the business is mildly capital intensive. Model N: This is an interesting company focused on revenue management for life sciences companies. Their software has seen growing adoption and they have reached the $100M revenue level and are just about to cross into profitability. Marin Software: This cloud-based advertising platform provider is seeing rapid revenue growth but sustaining large operating losses. The investor appetite for long-term losses will be tested here. The filings also include a few more mortgage investment companies and development stage biotechnology companies.
In terms of pricings February was busy for the first two weeks and dead for the last two. All nine pricings were completed by the 15th of the month. The largest deal was Zoetis (ZTS), which dominates the market for animal health products with over $4.2B in revenues. After pricing well at $26 the shares have traded in the $32-$33 range. Two technology deals, ExOne (XONE) and XOOM (XOOM), ignited high interest from investors with strong pricings and good aftermarket performance. ExOne, a 3D printing company, priced at $18 and has been trading at $26-28. XOOM, a consumer payments provider, priced at $16, had a substantial initial “pop” to $25 before drifting down to $21. As we enter March there are two fairly substantial deals in marketing that should price in the next two weeks: asset manager Artisan Partners, which promises a solid yield of 6.14%, and Silver Spring Networks, which is a much-anticipated technology offering in the “smart grid” space. For the full update including top and bottom performers, IPO Folio changes and all the charts and tables please refer to the March 4 2013 IPO Candygram (PDF).