U.S. IPO Weekly Recap: Schrödinger Shines While The Market Sleeps On Casper In 7-IPO Week

Seven IPOs and one SPAC entered public market this past week. Life sciences software maker Schrödinger (NASDAQ:SDGR) rocketed in its debut and contract researcher PPD (NASDAQ:PPD) completed 2020’s second billion-dollar deal, while mattress unicorn Casper (NYSE:CSPR) disappointed. Record label giant Warner Music (WMGC.RC), a building products maker, and a biotech submitted initial filings.

Schrödinger priced above the range to raise $202 million at a $1.1 billion market cap and popped 68% on its first day. The company is unprofitable, but it has large and sticky customers and a broad drug pipeline with a mix of internal programs and collaborations. Schrödinger finished up 88%.

In the year’s biggest deal yet, PPD joined the Billion-Dollar IPO Club by pricing at the high end to raise $1.6 billion at a $9.4 billion market cap. The company operates in a crowded space with large competitors, but has established itself as a global CRO of choice with clients including the top 50 biopharmas worldwide. PPD finished up 15%.

After slashing its valuation by 34%, Casper Sleep priced at the low end to raise $100 million at a $487 million market cap, less than half of its last private valuation. Despite leading the highly competitive DTC mattress market, investor taste has continued to shift away from money-losing unicorns. It opened 21% above its IPO price, but finished the week down 8%.

Preclinical gene editing biotech Beam Therapeutics (NASDAQ:BEAM) upsized its offering by 69% and priced at the high end to raise $180 million at a $906 million market cap, making it one of the largest preclinical biotech IPOs ever. Despite its early stage and unproven approach, Beam finished up 21%, continuing a hot streak for biotechs.

Recreational boat roll-up OneWater Marine (ONEW) priced at the bottom of the lowered range to raise $55 million at a $166 million market cap. The company originally planned to raise $60 million at a $181 million market cap but postponed in October 2019. Bolstered by strong performances from its peers, OneWater finished up 26%.

Mortgage REIT NexPoint Real Estate Finance (NYSE:NREF) priced at the low end to raise $95 million at a $335 million market cap, and finished down 1%. Florida bank Professional Holding Corp. (OTCPK:PFHD) priced slightly below the range to raise $57 million at a $232 million market cap, and finished up 6%.

8 IPOs During the Week of February 3rd, 2020

Issuer
Business

Deal
Size

Market Cap
at IPO

Price vs.
Midpoint

First Day
Return

Return
at 02/07

Schrödinger

$202M

$1,111M

13%

+68%

+88%

Provides a software platform for life sciences and materials research.

OneWater Marine

$55M

$166M

-37%

+26%

+26%

Recreational boat dealership that owns and operates 63 stores in the US.

Beam Therapeutics

$180M

$906M

6%

+10%

+21%

Preclinical biotech developing therapies based on single-base gene editing.

PPD

$1,620M

$9,423M

6%

+11%

+15%

LBO’d contract research organization that provides drug development services.

Professional Holding Corp.

$57M

$232M

-8%

+6%

+6%

Florida bank with nine locations across the Miami-Dade MSA.

InterPrivate Acquisition (IPV.U)

$210M

$261M

0%

+1%

+1%

Blank check company backed by merchant bank InterPrivate and led by its founder Ahmed Fattouh.

NexPoint R.E. Finance

$95M

$335M

-5%

-1%

-1%

Newly formed mortgage REIT focused on single-family rental and multifamily loans.

Casper

$100M

$487M

-33%

+13%

-8%

Direct-to-consumer mattress and bedding brand.

Two companies filed for IPOs this past week. Taken private by Access Industries in 2011 for $3.3 billion, Warner Music Group filed to return to the public markets with an IPO we estimate could raise $750 million. Building products maker The AZEK Company (AZEK) filed for an estimated $500 million IPO, and preclinical rare disease biotech Passage Bio (PASG) filed to raise $125 million.

3 Filings During the Week of February 3rd, 2020

Issuer
Business

Deal
Size

Sector

Lead
Underwriter

AZEK

$500M

Industrials

Barclays

Manufactures composite residential and commercial building products.

Warner Music

$750M

Communication Services

Morgan Stanley

Leading music publisher and record label.

Passage Bio

$125M

Health Care

JP Morgan

Preclinical biotech developing gene therapies for rare CNS disorders.

In other IPO news, workplace app Asana reportedly submitted a confidential filing with the SEC for a direct listing rather than a traditional IPO. Asana would join the ranks of other non-traditional tech unicorns Slack (NYSE:WORK) and Spotify (NYSE:SPOT), both of which have experienced rocky trading.

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 2/6/20, the Renaissance IPO Index was up 8.4% year-to-date, while the S&P 500 had a gain of 3.6%. Renaissance Capital’s IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Uber (NYSE:UBER) and Spotify. The Renaissance International IPO Index was up 4.4% year-to-date, while the ACWX was down 0.2%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Adyen and SoftBank.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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