IPO Candygram is back and richer than ever!

Whirly lollipop on orange background.

After a hiatus the IPO Candygram is being reintroduced using a much richer recipe – more carmel, deeper chocolate and a thicker chewy nougat center.

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When we started IPO Candy in 2009 the IPO market was nascent. Everything fit on a page or two and we could produce a Candygram every month. Now however we are tracking over 550 companies and the list continues to grow. Changes needed to be made!

You can jump to a full PDF version of this note via this link: IPO Candygram 1Q2014 Summary.

As a start we have created more segmented reports. We have divided our universe into “classes” for each year so we can look at them by cohort. Our full ecosystem reports are beginning to segment companies by type. This Candygram is a first step in the process. As we roll forward we will add special edition reports that look at individuals segments like internet, software, biotechnology, semiconductors, etc. Feedback from clients is that a sector-specific view is more useful in looking at performance and valuation.

The complete Candygram quarterly (which now runs to about 44 pages!) will follow a quarterly release schedule with sector reports in between.

This full addition contains the following tables:

  1. Performance: Class of 2014
  2. Performance: Class of 2013
  3. Performance: Class of 2012
  4. Overview: Sorted by return
  5. Overview: Sorted by date
  6. Overview: Sorted by S&P industry

One of the first things we want to do is improve on the S&P industry breakdown. Better more granular classifications are more helpful as are thematic overlays like “cloud” or “China” or “aging population.” In some cases the S&P industry category seems wrong.

Given the new scale and scope of the Candygram it now has a separate tab on the website and requires a MELTED CHOCOLATE subscription for full access. [However the summary and excerpts of future versions will be available to basic subscribers.]

Without further ado here are the main highlights for the IPO market in Q1 and overall performance.

First Quarter 2014 Activity

We count 67 deals priced in Q1 which had many talking about 2014 as a big year for the IPO market. No sooner was this plastered all over the web that the stock market began to cool off dramatically, especially for high valuation stocks and new IPO “story names” like Castlight (CSLT), Care.com (CRCM) and Coupons.com (COUP). Even huge revenues couldn’t lift King Digital Entertainment (KING) after their so-so IPO. (See related post – What to do with the King? March 25, 2014.)

The table below shows the deals in Q1 sorted by their post-IPO performance. We did a fair amount of work on Revance (RVNC) which has a non-injection version of botox that should provide to be extremely popular for those already being treated and the considerable portion of adults who have been on the fence due the drawbacks of current injection-based offerings. There are some potential challenges however which we outlined in our February 12th post – Revance (RVNC) not looking so fabulous.

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Orphan disease treatments are one of the themes we track at IPO Candy it’s clear that investors have an appetite for companies going after these indications. Simply put these tend to be small, niche diseases without viable treatments. If a company can field one they get to bring it to market and control the pricing. Typically these situations are very profitable for the drug provider.

There were a ton of biotechnology deals in Q1 and their performance was all over the map. On the internet and technology side the fizzle was already underway at the end of the quarter. For example Castlight (CSLT) shot out to a big gain early on, reaching $40 after pricing at $16 only to fall all the way back to $15-16 two months later. There’s a great story there for sure but the $2.5B market capitalization on about $100M in bookings is still pretty high.

One name we are looking at for the IPO Folio is Care.com (CRCM) which met a similar fate. However CRCM now has a market capitalization of $371M which feels more reasonable in terms of risk/reward. After we review the company results reported today (May 1st) we will make a decision regarding the IPO Folio.

The success of the Malibu Boats (MBUU) offering came as somewhat of a surprise. These expensive sport boats seem like the ultimate in luxury spending. The market is recovering but the upside seems limited. Our note Malibu Boats IPO for Enthusiasts Only spells out more detail.

Overall the group was up 8% from IPO price with the top 10 up an average of 68% and the bottom 10 down an average of 36%. The numbers understate losses for investors who purchased companies in the open market post-IPO at much higher prices.

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