The IPO Buzz: A Moonshot and A Blank Check

The IPO Express blew through Wall Street on its final run of the summer last week and its cargo did not disappoint: It delivered an opening-day moonshot and a blank check that had some pop.

A moonshot is any IPO that closes it opening day with a gain of 100 percent or more.

Lighting Up The August Sky

Global Blood Therapeutics (GBT), the biopharmaceutical company developing its initial product candidate as a once daily pill for sickle cell disease, exploded with an opening-gain gain of 155.5 percent – a moonshot. Global Blood priced its IPO at $20 per share on Tuesday night. On Wednesday, it closed its first day of trading at $43.11. That was the 269th IPO to jump with an opening-day gain of 100 percent or more, according to the U.S. Securities and Exchange Commission filings dating back to 1980.

The U.S. Food and Drug Administration has suggested that the development of new therapies for sickle cell disease is one of the FDA’s priorities, according to Global Blood’s prospectus. Sickle cell disease (SCD) is an inherited disease that affects people of African descent. It can cause multiple organ failure and premature death. SCD affects about 100,000 people in the United States, according to Global Blood’s website.

A Little Moonshot History

Genentech was the first recorded moonshot. That happened on Oct. 14, 1980. Its IPO was priced at $35 per share. Genentech closed its opening day at $71.25, UP 103.6 percent from its IPO price.

Update: Genentech was taken over in June 1999, went public a month later in July 1999, and taken private again in March 2009.

VA Linux Systems scored the sharpest opening-day gain, UP 697.5 percent from its initial public offering price. Its IPO was priced on Dec. 9, 1999, at $30 per share and closed its opening day at $239.25. The IPO had a wild ride that day. It was priced at $30, opened at $299, sold as high as $320 and closed at $239.25.

Update: In the years that followed, VA Linux went through a series of mergers, acquisitions and name changes before it was finally acquired in July 2015.

Blank Check, Please!

The week’s other surprise came from a “blank check” offering.

Blank check offerings of yesteryear were regarded with a jaded eye of suspicion. The take was: Give your money to the promoter and some sort of investment would be made at some future date. And the general feeling was that the promoter would invest in a plantation in some Central or South American country that had no extradition agreements with the United States.

Today’s blank check offerings are different.

Generally speaking, the capital raised from the offering goes into escrow and earns interest. The promoters have about 18 months to come up with a plan. If they do, the shareholders can vote to accept or reject the plan. If they reject it, they get their money back plus the accrued interest. If the promoters don’t come up with a plan by the end of the 18 months, investors get their money back plus the accrued interest.

Blank check offerings have become popular.

Going back over the last five years, 46 blank check IPOs have been priced. They raised about $5.4 billion. Now that’s serious money.

Their opening-day performances have been largely forgettable. The scorecard shows: Twenty-seven blank check IPOs closed their opening day of trading above issue price, eight below and 11 were unchanged. The average opening-day gain for all 46 was 0.3 percent.

Last week’s blank check offering stood apart from the rest. It was a solid winner.

Gores Holdings (GRSHU) was the final IPO of the summer of 2015 and it was a blank check offering. Its IPO was priced at the traditional $10 per unit, but closed at $10.49. That was UP 4.9 percent from its IPO price versus an average 0.1 percent gain for the other 45 blank check IPOs.

This week’s IPO calendar has headed out the door with the investment bankers until after Labor Day. But stay tuned. Something always happens, even when the Street has blocked out vacation time.

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.