IPO News This Week: Another Week with 10 More Firms Seeking Entry into the Capital Markets

There were 10 initial public offerings (IPOs) on the calendar last week and 10 firms succeeded in gaining access to the public markets although a couple of those scheduled were delayed and a couple of others stepped up. The total amount raised reached a combined $1.6 billion and the average first-day pop was around 10%, a bit below the 13% average, but none of last week's IPOs broke issue and closed lower than the offering price.

There are 10 more IPO's on the coming week's calendar and they are looking to raise a combined total of about $1.9 billion. This is the last big week for IPOs before Thanksgiving and probably the last for the year.

Here's a recap of last week's IPOs:

CBTX Inc. (CBTX) raised $62 million on the sale of 2.4 million shares at $26, the high end of the expected range. Shares popped 10% on the IPO and closed the week up 12%.

Meridian Bank (NASDAQ:MRBK) raised $40 million on the sale of 2.4 million shares at $17, the low end of the expected range. Shares popped 7% on the Friday IPO.

Sogou Inc. (SOGO) sold 45 million shares at $13, the high end of the expected range, raising $585 million. Shares popped 4% on the IPO and closed the week up 7%.

Erytech Pharmaceuticals (ERYP) raised $109 million on the sale of 4.7 million shares priced at $23.26. Shares popped 6.4% on the Friday IPO.

Bandwidth Inc. (BAND) ) raised $80 million on the sale of 4 million shares at $20 a share, the low end of the range. Shares popped 6% on the Friday IPO.

Metropolitan Bank Holding (MCB) raised $109 million on the sale of 3.1 million shares at $ 35, above the expected range. Shares added 6% on the Friday IPO.

PPDAI Group Inc. (PPDF) raised $221 million on an offering of 17 million shares at $13, below the expected range. Shares added 1% on the IPO on the Friday IPO.

Apellis Pharmaceuticals Inc. (APLS) raised $150 million on the sale of 10.7 million shares at $14, the mid-point of the expected range. Shares closed flat on the Thursday IPO and flat for the week.

Four Seasons Education (Cayman) Inc. (FEDU) raised $101 million on its offering of 10.1 million shares prices at $10, the mid-point of the expected range. Shares dropped 5% on the IPO and closed the week flat.

InflaRX (IFRX) raised $100 million on the sale of 6.7 million shares at $15, the mid-point of the expected range. Shares closed the week unchanged.

Through the week ending November 10, IPO ETF manager Renaissance Capital reported that 141 IPOs have priced in the U.S. so far this year, up nearly 47% year over year. Total proceeds raised through last week equaled $33.2 billion, up nearly 98% year over year.

For 2016, Renaissance Capital reported a total of 105 IPOs, down 38% year over year from 170 in 2015. Total 2016 proceeds amounted to $18.8 billion compared with a 2015 total of $30 billion. Renaissance Capital does not include “best efforts” or blank-check companies in its totals, nor does it include IPOs that raise less than $10 million.

Here are the 10 companies seeking a place in the public markets next week.

SendGrid Inc. is a cloud-based digital communications platform for businesses. The company plans to offer 7.7 million shares in an expected price range of $13.50 to $14.50 to raise $112 million at a market cap of $584 million. Underwriters are Morgan Stanley, J.P. Morgan, William Blair, KeyBanc Capital Markets, Piper Jaffray, and Stifel. Shares are set to price Tuesday and begin trading Wednesday on the New York Stock Exchange under the ticker symbol SEND.

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Arsanis Inc. is a clinical-stage biopharmaceutical company developing monoclonal antibody immunotherapies for serious infectious diseases. The company plans to offer 3.1 million shares in an expected price range of $15 to $17 to raise $15 million. Underwriters are Citi, Cowen & Co., and Piper Jaffray. Shares are expected to price Wednesday and begin trading Thursday on the Nasdaq under the ticker symbol ASNS.

Jianpu Technology Inc. is an online consumer loan and credit platform based in Beijing. The company plans to offer 22.5 million shares in an expected price range of $8.50 to $10.50 to raise $214 million at a market cap of $1.6 billion. Underwriters are Goldman Sachs (Asia), Morgan Stanley, J.P. Morgan, and China Renaissance. Shares are expected to price Wednesday and begin trading Thursday on the New York Stock Exchange under the ticker symbol JT.

MPM Holdings Inc. is a producer of specialty silicones and other chemical additives. The company plans to sell 14.6 million shares in an expected price range of $23 to $25 to raise $350 million at a market cap of $1.4 billion. Shares already trade on the OTCQX market place under the ticker symbol MPMQ. Underwriters include J.P. Morgan, Goldman Sachs, Credit Suisse, Deutsche Bank, UBS Investment Bank, Wells Fargo Securities, and BMO Capital Markets. Shares are expected to price Wednesday and begin trading Thursday on the New York Stock Exchange under the ticker symbol MPMH.

Bluegreen Vacations Corp. sells timeshares and manages resorts in the United States. The company plans to offer 6.5 million shares in an expected price range of $16 to $18 to raise $111 million at a market cap of $1.3 billion. Underwriters are Stifel, Credit Suisse, BofA/Merrill Lynch, and SunTrust Robinson Humphrey. Shares are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol BXG.

Legacy Acquisition Corp. is a blank-check company seeking to make its first acquisition. The company plans to offer 30 million units at $10 per unit to raise $300 million at a market cap of $375 million. Each unit consists of one share of common stock and one warrant to purchase one-half of one share exercisable at $11.50. Underwriters are Wells Fargo Securities, Cantor Fitzgerald, Stifel, and Loop Capital Markets. Units are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol LGCU.

Molino Cañuelas SACIFIA is a leading Argentina-based food producer. The company plans to offer 19.5 million shares in an expected range of $14 to $16 to raise $293 million at a market cap of $940 million. Underwriters are J.P. Morgan, UBS Investment Bank, HSBC Corp., and ITAU BBA. Shares are expected to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol MOLC.

Sailpoint Technologies Holdings Inc. is a provider of identity governance software for enterprise clients. The company plans to offer 20 million shares in an expected price range of $9 to $11 to raise $200 at a market cap of $896 million. Underwriters are Morgan Stanley, Citi, Jefferies, RBC Capital Markets, KeyBanc Capital Markets, Canaccord Genuity, and Oppenheimer & Co. Shares are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol SAIL.

scPharmaceuticals Inc. is developing and commercializing an injectable version of an intravenous drug for heart failure. The company plans to offer 6.4 million shares in an expected price range of $14 to $16 to raise $96 million at a market cap of $264 million. Underwriters are Jefferies, Leerink Partners, and BMO Capital Markets. Shares are set to price Thursday and begin trading Friday on the Nasdaq under the ticker symbol SCPH.

Stitch Fix Inc. is an online personal style and clothing retailer. The company plans to offer 10 million shares in an expected price range of $18 to $20 to raise $190 million at a market cap of $1.8 billion. Underwriters are Goldman Sachs, J.P. Morgan, Barclays, RBC Capital Markets, Piper Jaffray, Stifel, and William Blair. Shares are set to price Thursday and begin trading Friday on the Nasdaq under the ticker symbol SFIX.

Source: https://goo.gl/g59Ley

IPO Calendar

Recently PricedUpcoming IPOsFuture IPOsWithdrawn

This Week

 • 4 Total

Company Name	Proposed Symbol	Exchange	Price Range	Shares	Week Of
CarGurus	CARG	Nasdaq	$13.00 - $15.00	9,400,000	10/9/2017
OptiNose	OPTN	Nasdaq	$15.00 - $17.00	6,250,000	10/9/2017
OrthoPediatrics	KIDS	Nasdaq	$12.00 - $14.00	4,000,000	10/9/2017
Restoration Robotics	HAIR	Nasdaq	$7.00 - $9.00	3,125,000	10/9/2017

Next Week

 • 8 Total

Company Name	Proposed Symbol	Exchange	Price Range	Shares	Week Of
FAT Brands	FAT	Nasdaq	$12.00	2,000,000	10/16/2017
Gadsden Growth Properties	GADS	NYSE	$9.00 - $11.00	3,500,000	10/16/2017
Longfin	LFIN	Nasdaq	$5.00	10,000,000	10/16/2017
MongoDB	MDB	Nasdaq	$18.00 - $20.00	8,000,000	10/16/2017
Qudian	QD	NYSE	$19.00 - $22.00	37,500,000	10/16/2017
RISE Education	REDU	Nasdaq	$12.00 - $14.00	11,000,000	10/16/2017
RumbleOn	RMBL	Nasdaq	$9.49	2,000,000	10/16/2017
Sea	SE	NYSE	$12.00 - $14.00	49,690,000	10/16/2017

IPO content provided by Renaissance Capital LLC,

Can You Hear the Music? Spotify Dances Towards IPO

Music streaming service Spotify may opt for a Direct Public Offering in the markets, instead of an underwritten IPO. According to a report in the Wall Street Journal, the company is said to be "seriously considering" the possibility.
There are several advantages for Spotify if it goes the direct listing route. First, it could save the considerable fees paid to investment banks for underwritten IPOs. Second, it could expose the company to less regulatory scrutiny and its founders would be able to retain more control after being publicly listed. The latter is especially important for Spotify as it experiments with its business model in its quest for profitability. These advantages do not come without caveats. For example, public investors may value the company below its own expectations. The WSJ report mentions the case of Google, which used a Dutch Auction method to offer its shares to the public and debuted at $85 per share; expectations were for a pricing between $108 and $135. A DPO could also mean more volatility for Spotify's shares, if large institutional investors, who generally invest for the long term and act to stabilize a company's stock price, choose not to invest.

Spotify has been clearing the decks for an IPO for some time now. Recently, it reached an agreement with music publishers to lower royalty rates, a critical part of its balance sheet. According to the terms of the deal, music publishers will receive lower royalty fees from Spotify in exchange for the music streaming service restricting big new album releases to its paid tier. Before now, all music launches were available simultaneously on free and paid tiers. (See also: Spotify).

The service is expected to tap the public markets later this year. Here is a brief primer on Spotify's finances and risks.

The Financial Picture

Spotify is valued at $8.5 billion in private markets. The Swedish company raised $1.5 billion in debt financing during its last funding round from an array of investors, including Goldman Sachs and private equity giant TPG. Per the terms of that deal, the company is required to pay 5 percent annual interest on its debt. The interest will increase by 1 percentage point until the company goes public. That is when investors will be able to cash in their bonds for a 20 percent discount to the company’s proposed stock price. (See also: Startup Analysis: How Much Is Spotify Worth?)

The most important thing to remember when evaluating Spotify’s finances is that its fortunes are intertwined with those of the broader music business. The industry has been in steep decline since the start of the millennium, when services like Napster and Apple Inc.’s (AAPL)

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 iTunes disrupted the business model. Rampant piracy coupled with the unbundling of albums played havoc with the industry’s model. Unit sales and royalty rates have not been enough to offset the decline in sales.

But things have taken a turn for the better of late. The industry reported its second successive year of profits last year, thanks largely to music streaming services. According to research from Goldman Sachs, streaming has become a much more sustainable revenue model for the music industry. Goldman forecasts streaming will help industry revenues double to $104 billion by 2030.

While it has helped revive the industry, Spotify has not partaken in much of this success. The London-based startup reported impressive revenues of $2.2 billion in 2015, the last year for which its sales are known. However, it paid $1.8 billion of that figure out to music labels. After adding in costs for marketing and administration, the startup’s finances tallied to a net loss of $194 million in 2015. And its royalty costs aren’t going down anytime soon. According to reports, publishing rights can be “as much as 15 percent of a deal,” up from 10 percent a couple of years ago.

The Competition

When launched 11 years ago, Spotify was part of a crowded field, one that included the likes of Rdio and Rhapsody. But the field has whittled down considerably since then. As other services closed shop, Spotify survived and thrived. But the service faces a new set of formidable competitors. Apple launched Apple Music in 2015 and Amazon.com Inc. (AMZN)

Amazon.com Inc

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 undercut Spotify’s $9.99 per month price for paid subscribers by offering a $5 subscription service through Amazon Music.



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Both services have made impressive gains in a short period of time. Apple’s service, which was launched in 2015, already boasts 20 million subscribers, as of December 2016. Amazon has refined its algorithms and integrated its service with Alexa, it’s smart assistant. (See also: Amazon And Pandora Offer $5 Music Streaming Service.)

There are two ways in which Spotify’s new competitors can affect its business.

First, they apply margin pressure on the company because of the strength of their brand. For example, Apple Music reported gross margins of 40 percent last year while Spotify had margins of 25 percent. This was partly because the company increased its marketing costs by offering deep discounts to attract more users to its service even as its royalty rates remained the same. The company’s gross margin per user declined to $3.45 in 2015 from $4.20 in 2013.

Second, Apple and Amazon have deep pockets and offer a number of channels for music labels to mop up additional revenues from their content. For example, Amazon Music could drive merchandise sales for music labels on its e-commerce site through song promotions. Similarly, Apple has attracted superstars like Taylor Swift to its service.

But Spotify is taking steps to counter competition.

A surge in its user numbers may help the service in the long run. Spotify reported 50 million paid subscribers earlier this month. According to reports, it is responsible for 10 percent of revenues at prominent music labels. This gives it sufficient negotiating leverage to help drive down royalty rates.

Spotify has also begun diversifying its business and reducing its reliance on music labels for content. It is expanding beyond its core offerings into video and podcasts. The service has 12 different video series under production currently. 

Media partners for its video stream include the likes of BBC, Vice, Turner, Viacom (VIAB) and Walt Disney Co. (DIS)

Viacom Inc

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Walt Disney Company

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 As mentioned earlier, it has also reached an agreement with music labels to restrict big releases to the paid tier category, instead of offering them for free (as it has done in the past).

Risk Factors

Spotify’s recent growth has cost the company. Its sales and marketing costs ballooned by 42 percent between 2014 and 2015. As the service ventures into new products, costs will likely increase and eat into its overall profitability. New agreements with music services may have helped the company garner more business but contributions to its balance sheet will likely be offset by fresh fees.

Market reception and content costs for its new ventures will play an important part in determining the service's success. Spotify has not disclosed costs associated with new products. However, given that the service is working with premium content providers for the new series, it is likely that they will be substantial. If the new series do not offer substantial returns, the costs will be sunk.

Then there is the scale and breadth of the competition. When all said and done, Apple and Amazon have deep pockets and famously profitable businesses beyond music. This means that they can absorb losses from their streaming music lines and show profitability elsewhere. Spotify is completely reliant on music streaming, a business that is heavily dependent on royalty rates from music publishers. 

Pandora Media Inc

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The case of Pandora Media Inc. (P)  which is under pressure to sell, is an example of what can go wrong when music streaming businesses take too long to innovate.

Source: https://goo.gl/j3XoIc