Last week made it feel like we’re really back from the break. Several IPO deals were priced and traded well in the aftermarket. We liked the One Medical (ONEM) deal enough to buy some on opening day at $18/share where it was still a good investment based on our analysis.

This week we have seven deals up for pricing – Four Wednesday night and three on Thursday night. Of the group we are focusing our efforts on Schrodinger (SDGR) and Casper (CSPR). The big deal of the week is PPD (PPD) but it’s a fairly late stage company in the drug development outsourcing business. We may a short look at OneWater Marine (ONEW) which tried to come public before at a higher price. Maybe it will be cheap enough to work this time.

Finally we cover some confidential filings that are more interesting than the public ones from last week.

Last Week:

One Medical (ONEM) – The deal priced at the low end of the range at $14 despite solid demand. The shares opened at $18 (where we bought some) and have gone up to $23.95. This is one we’ll be following. If you want the full story please see our note: One Medical and the “membership model” of delivering primary care.

Black Diamond (BDTX) – They hit the BINGO of advanced science lingo including cancer genetics, protein function and targeted small molecule therapies. The deal priced above the range at $19 and then doubled $38.

Reynolds Consumer (REYN) – This large consumer brand priced near the bottom of the range at $26 and has climbed since to $29.90. Investors like the defensive nature of the business and yield. This feels like one of those “slo-mo” IPO names that may perform like Parsons (PSN) which has gradually moved from the low-$30’s to the low-$40’s.

Arcutis Biotherapeutics (ARQT) – This small biotech in the dermatological space priced their deal at the top end of the range at $17 and traded up to end the week at $24. Their lead drug completed a Phase 2b trial but it’s not an area we follow.

AnPac Bio-Medical Science (ANPC) – This one was a holdover from a couple of weeks ago and wasn’t on the schedule. But they managed to get it priced at the bottom of the range at $12. It’s a tiny deal at $16M and the shares have dropped to $10.60. They claim to have a kind of “blood test for cancer” which seems too good to be true. But if it were true…

This Week:

Schrodinger (SDGR) – This is a high end enterprise software company with a solution to improve the discovery of new molecules for use in drug development and new engineered materials. One side of the company is a traditional enterprise SaaS business while the other is a collection of interests in biotechnology companies that are commercializing these new drugs. We will have a note out on this one to go into more detail. We can already tell that valuation will be tricky because of the two very different businesses. It’s a $150M deal and a $1B market value. Morgan Stanley has the lead and the current price range is $14-16. Schrodinger company website.

Casper (CSPR) – I had to groan a few times during the roadshow presentation because this mattress company is positioning itself as the “leader in the sleep economy” which they suggest will become the “third pillar of wellness” with other two being fitness and nutrition. Of course sleep is important and mattress stores were begging to be disrupted but the “sleep economy?” While Casper is predominantly a mattress company they have products that they claim expand their TAM to include bedroom furniture, bedding, pajamas, pillows, travel sleep accessories, pet beds and whatever “ambience optimization” is. On their list are also CPAP devices, medical diagnostic services, tracking and monitoring devices and even sleep supplements. Why they do this is a puzzle to me. If you do the math and look at their “real” TAM it’s more like $80B globally and $15B in the US. On the plus side revenue growth has been excellent at $169M -> $251M -> $358M in the last three years. Valuation isn’t bad either with a market cap of $734M using the mid-point of the $17-19 range. We’ll be out with more on this one including a valuation model.

Beam Therapeutics (BEAM) -There some excitement around this “next generation” gene editing biotech. We remember well the CRISPR wave of IPO successes. Beam is aiming to modify single base pairs and create permanent cures for many genetic diseases. They have a portfolio of 12 programs which are very early in the development stages. Still investors may view this as an attractive “call option” on an advanced therapy method that might work. It’s certainly an impressive company. JP Morgan has the books and the range is $15-17. Beam company website.

PPD (PPD) – This is the “big deal” this week at $1.5B offered that will value the company equity at ~$9B. This is a big company with $4B in trailing sales and the market cap is $13B in the proposed range of $24-27. Last week REYN did pretty well. This is a different space but a similar sized deal in a safer part of the market. Barclays has the books.

OneWater Marine (ONEW) – Recreational boat dealer. Has pitched their “roll-up” strategy before. They are trying again at a lower price. Deal size is $60M with a $180M cap. RayJay and Baird are pitching it. Current range is $12-14. The deal is coming cheap in terms of valuation so it may work. We’ll take a closer look prior to pricing. The current rage is $12-14 with RayJay leading. Some insiders are buying on the deal which will help to get it done this time.

Professional Holding (PFHD) – A regional bank in Florida with 9 branches. $62M deal with a $250M cap. Stephens and KBW are leading. The range is $19-21.

NexPoint Real Estate Finance (NREF) – This is a mortgage REIT investing in a wide variety of real estate loans. Price range is $19-21. It’s a small deal at $100M. RayJay is leading and this will be marketing to HNW investors and others interested in generating yield.

New Filings:

There were a few new filings but nothing to get excited about. However two confidential filers will be worth a look when more of their information is made public. Jamf is a software company that basically takes makes the Apple products enterprise-friendly with features like management and security. It’s not clear how interoperable their stuff is with other Windows-based systems and how far they can get up the food chain from device management. Also Dun & Bradstreet is looking to go public again after going private in a $6.5B transaction just in 2018!

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