Last week the risk appetite in new issue market waned a bit. We observed premiums shrink in both SPAC and regular way IPO names. The two deals we liked the most – Datto (MSP) and Foghorn (FHTX) both did reasonably well – Datto priced at $27 and finished the week at $29 and Foghorn priced in the middle of the range at $16 and ended the week at $18.12.
THIS WEEK – There are 14 deals scheduled for this week and we see underlying themes around COVID-driven “nesting” and innovation in the staid insurance markets.
After the great success Lemonade (LMND) in the homeowners insurance space we are not surprised to see Root (ROOT) come to market with their offering. Root is focused on auto insurance and uses tracking technology to personalize your insurance quotes. Basically this is taking the traditional “cherry picking” of the most profitable customers to the next level. Insurance companies like Geico have been aware of this but so far have failed to capitalize on the opportunity. Like Lemonade the Root management team views auto as a first step into offering additional products and services to customers using their personalized approach. The company seems to be taking a “blitzscaling” approach with explosive growth in revenues to $432M (LTM) and immense losses of $330M over the same period. The current $22-25 range implies a market cap of ~$6B. I guess if you think LMND is worth 30x sales then that’s a bargain. 😉
Investors also continue to love Duck Creek Technologies (DCT) which provides a technology stack for existing (P&C) insurance companies to upgrade their infrastructure to better compete with these upstarts. DCT is valued at ~$6B on run-rate revenues of $240M. Another company coming public this week is MediaAlpha (MAX) which gives insurance companies technology platform for better customer acquisition. It’s worth a deeper look but on the surface seems to like a “Google AdWords for the insurance market.” It also reminds me a little of Cardlytics (CDLX) which put traditional banks in a position to monetize consumer purchase intent based on prior spending. MediaAlpha looks like a winner.
The “nesting” trend has been a big driver of yard features like swimming pools. Leslie’s (LESL) is one of the leading providers of pool supplies and service. Leslie’s does $1B in revenue and is profitable. Their very low growth of 4% on LTM revenues is puzzling in what has been a booming market in pools. The stock chart below on POOL (which has $3.6B in revenues and growing close to 30%) tells the story. We’ll have to take a closer look at Leslie’s to understand what’s going on there.
Mortgage companies continue to market into the market with mixed results after a strong showing from Rocket (RKT). This week we have AmeriHome (AHM) and Caliber Home Loans (HOMS). Unless we see something surprising in their roadshows it’s hard to get excited about these.
There are two technology deals coming this week: Allegro MicroSystems (ALGM) is a fabless chip producer for auto and industrial markets that’s being spun out into the public market. Also Mavenir (MVNR) is a software provider in the mobile networks space. We’ll have a closer read on these two later in the week.
There are handful of biotech names coming this week as well. One is small but has been asked about many times: G-Medical Innovations (GMVD) is a small off-the-radar deal and they provide technology that turns your smart phone into a remote medical monitoring system. This is a market sector that has lots of potential but it’s not clear if G-Medical is in a position to thrive in this market given how competitive the space is now.
Elsewhere in biotech there is a saliva-based COVID testing company out of China coming out called GBS (GBS). What’s odd about this one is they started out focusing on blood glucose testing (no pin prick) but then pivoted to COVID before ever really getting their system into the commercial market. Given the lackluster stock performance of Fluidigm (FLDM) we’re not sure how effective these saliva-based testing kits are. It’s also a very small deal. But hey, we turn over every stone so we’ll dig into it some more.
We had some new SPAC IPO names complete their business combinations and they are now live. These all link to their slide decks on SPACvest.
Supply chain software company E2OPEN is the target for CC Neuberger Holdings I (PCPL). The EV of $2.6B is claimed to be 7x 2021 revenue and 21x 2020 AJEBITDA. This isn’t a fast growing sector so the valuation seems pretty full. We’ll take a closer look at this one and have a model as they get closer to finalizing their transaction. You can get more details from their IPO investor deck: E2OPEN on SPACvest.
Billtrust is a platform for streamlining financial back-office processes from credit approval and monitoring to invoicing and payment management. They are the target for South Mountain Merger (SMMC). The success of prior IPO names in this space includes Bill.com (BILL) and Coupa (COUP) carry premium valuations. More details are in their investor deck: Billtrust on SPACvest.
Get pure IPO Goodness - no ads, no fluff, no SPAM.