The IPO Buzz: A Change in the IPO Weather

As the NASDAQ Composite Index reaches for 5,000, a level it has not seen in 15 years, the question arises: “Where are the IPOs?” Last week’s calendar produced two small deals. This week has none. However, there are indications that a favored industrial sector from yesteryear is awaiting in the wings to make a comeback.

It is technology.

There was more to last’s week IPO traffic than two small health-care deals getting out the door. Two other health-care IPOs were postponed and two more were withdrawn. The focus was on the U.S. Securities and Exchange Commission filing window. Let’s take a quick look.

A Peek Through The Window

eASIC (EASI – proposed) filed for an IPO to raise $75 million. Based in Santa Clara, California, eASIC believes it has pioneered a differentiated solution that lets it rapidly  deliver custom integrated circuits in a cost-effective way, creating value for its customers’ hardware and software systems.

SolarEdge Technologies (SEDG – proposed) filed for an IPO to raise $125 million. Based in Israel, SolarEdge believes it has invented an intelligent inverter solution that has changed the way power is harvested and managed in a solar PV system.

Note: For the six months ended Dec. 31, 2014, SolarEdge reported net income of $5.9 million on revenues of $140.3 million, a swing to profitability from a year-ago net loss of $13.1 million on revenues of $58.1 million.

A Tech Baby Boom

And there was more news concerning technology IPOs. The New York Times ran a story on Friday, Feb. 20, 2015: “Investors Create a Billion-Dollar-Baby Boom.” Most of the companies mentioned, such as Snapchat, Pinterest and Lyft, are either in technology or are using tech to get a leg up on their competitors. The NYT article went on to report: “The size of investments has clearly picked up. About $48.3 billion was invested in 2014, up 61 percent from the same time the previous year, according to a report by the National Venture Capital Association and PricewaterhouseCoopers. But that money went into 4,356 deals, up only 4 percent, suggesting that more of that capital is going into fewer — and bigger — rounds.

Let’s stop the music right there.

The article reported 4,356 deals, but not the number of companies. Nevertheless, that is good news for future IPO calendars. From January 2000 through December 2014, a total of 2,514 IPOs were priced, according to the U.S. Securities and Exchange Commission filings, or an average of 168 IPOs a year. The number of companies getting venture capital deals in 2014 should fill an IPO calendar for years to come.

Now back to the present and this year’s IPO traffic.

Of the 268 IPOs priced in 2014, 95 were from the health-care sector (biotech, pharmaceutics, medical instruments and medical supplies) and 44 were from the technology sector. The health- care sector’s momentum spilled over into this year.

Fourteen of the 23 IPOs priced in 2015 are from health care. If last week was any indication (two IPOs priced below filing range, two postponed and two withdrawn), the health-care sector is beginning to look a little anemic.

But not to worry: It has been said that when God closes a door, He opens a window.

The indications are that technology could swing back into style.

2015’s Tech Duo

So far only two technology IPOs have come to market in 2015. They are Box (BOX) and Inovalon Holdings (INOV). Each has done well.

Box priced its IPO of 12.5 million shares at $14 each on Jan. 22, UP from $11 to $13 per share. The stock started trading on Jan. 23, and closed its opening day at $23.23, UP 65.9 percent from its IPO price. Box closed on Friday, Feb. 20, at $18.85, UP 45 percent from its IPO price, but down 19 percent from its opening-day close.

Inovalon Holdings priced its IPO of 22.2 million shares at $27 each on Feb. 11, UP from its initial filing at $21 to $24 per share. That stock opened on Feb. 12 at $33.16 and closed its opening day at $27, unchanged from its IPO price. Inovalon closed on Friday at $29.84, UP 10.5 percent from its IPO price.

Watching Wowo

There is a name on this week’s calendar, but it is there as merely a matter of information. The company is coming to market as a “best efforts” offering. That means the dealer will act as an agent, not as an underwriter, and will make an effort to sell whatever number of shares it can, and the issuer is on its own for any shares not sold. Here is the offering:

Wowo Ltd. (WOWO – proposed) is a Beijing-based operator of third-party e-commerce platforms. It operates 55tuan.com, a group-buying site that some have called China’s Groupon. But Wowo has developed its business to focus on local entertainment and lifestyle services such as restaurants, movie theaters and beauty salons. Recently Wowo has moved into mobile e-commerce.

Stay tuned.

Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.