The IPO Buzz: An IPO Heat Wave

Wall Street is in the middle of an IPO heat wave. Jamf, a provider of Apple device management software, leads a calendar of seven IPOs this week. Fourteen deals got priced last week. And the filings just kept pouring into the IPO pipeline.

Two IPOs scored moonshots last week: Berkeley Lights and nCino. A moonshot occurs when an IPO doubles its price – gaining 100 percent – or more on its first day of trading. Here are the stats:

  • On Friday, July 17, digital cell biology company Berkeley Lights (BLI) closed its first day of trading on the NASDAQ at $65.45, up 197.5 percent from its IPO price of $22.
  • On Tuesday, July 14, cloud banking software company nCino (NCNO) closed its first day of trading on the NASDAQ at $91.59, up 195.5 percent from its IPO price at $31.

The heat and the humidity were torrid at the U.S. Securities and Exchange Commission’s filing window, which booked 12 new filings (S-1 filings) and 13 amended filings (S-1/A filings).

The U.S. stock market was a friend of the trend. For the week, the Dow Jones Industrial Average rose 2.3 percent and the Standard & Poor’s 500 gained 1.2 percent. The NASDAQ Composite Index, however, slipped 1.1 percent.  (For more details, click the hyperlink above for The Wall Street Journal story.)

U.S. mortgage rates dove to record lows. The 30-year fixed mortgage rate fell to 2.98 percent for the first time since Freddie Mac began tracking the data 50 years ago.

The financial press focused on some big names like Palantir, which announced its confidential IPO filing on July 6th, and AirBnB, which indicated that it was still planning to go public despite the disruption of the hospitality industry due to the COVID-19 pandemic.  Those names won’t appear on IPOScoop’s IPO Calendar, however, until these companies file public S-1s (prospectuses) with the SEC.

A heat wave forecast often comes with a safety advisory. That situation also applies to the IPO market. This is a good time to remind IPO investors to read the “risk factors” in the prospectus. (We’ll have more on risk factors in a moment.) You can find the prospectus by checking a company’s IPO profile on IPOScoop.com and clicking on the link next to the words: View Prospectus

Seven IPOs in the Wings

Now let’s take a look at the seven deals on this week’s IPO Calendar, organized by pricing and trading dates. Two deals are carryovers from last week. If all seven IPOs get priced, bankers expect to raise about $4.753 billion. One of the carryovers is the $4 billion SPAC, Pershing Square Tontine Holdings.

Day-to-Day pricing:

ACell (ACLL proposed), based in Columbia, Maryland, is a carryover from last week’s IPO Calendar. The company describes itself as a leading regenerative medicine company focused on the development, manufacture and sale of products primarily used in acute care settings to treat moderate to severe wounds. Its products use its proprietary pig urinary bladder matrix platform technology, which is designed to enhance the body’s ability to restore natural tissue and minimize scarring in the management of traumatic, surgical and chronic wounds, burns, hernias and other conditions requiring the reinforcement of soft tissue, the prospectus says.

This is an IPO of 5 million shares at $14 to $16 each to trade on the NASDAQ.

Under “Risk Factors” on pages 17-18 of the amended prospectus (S-1/A)  filed July 15, 2020, with the SEC, ACell disclosed  that it had agreed to pay a $3 million criminal fine and a settlement of $12.8 million plus interest over five years to the U.S. Department of Justice (DOJ) and the states of Maryland, Wisconsin and Florida under terms of the federal and state settlement agreements that it had entered into on May 14, 2019, and June 11, 2019.  In the company’s news release on June 11, 2019, to announce the $15 million criminal and civil settlements, ACell said:  “The activities that DOJ investigated occurred many years ago, when ACell was headed by a different management team.”

On June 11, 2019, the DOJ said in a news release that ACell pleaded guilty and would pay $15 million to resolve criminal charges and civil false claims allegations relating to its MicroMatrix powder wound dressing. The company pleaded guilty to failure and refusal to report to the FDA that it had removed more than 30,000 MicroMatrix devices from inventories after learning in January 2012 that the devices were contaminated with endotoxin. That type of contamination can cause fever, infection, septic shock and death. Under the terms of the plea agreement, ACell agreed to pay a $3 million fine, the DOJ said.  ACell admitted that it did not tell doctors, hospitals or its own sales force about its recall of the MicroMatrix devices.

The DOJ news release also said: “Pursuant to the civil settlement under the False Claims Act, ACell will pay $12 million over five years to resolve its civil liability for causing false claims for MicroMatrix to be submitted to government health care programs.” The settlements would return “dollars back to the Medicare program for false claims,” said U.S. Attorney for the District of Maryland Robert K. Hur.

Dr. Ned Sharpless, who was the Acting FDA Commissioner at the time, was quoted in the DOJ news release as saying: “By not notifying the FDA nor being forthcoming about their reasons for the product removal, ACell executives placed profit above patient safety.”

Monday night pricing for Tuesday trading:

Property Solutions Acquisition (PSACU proposed), based in New York, is a newly organized blank check company, also known as a special-purpose acquisition company (SPAC). Its target companies will range from real estate service companies (property managers, mortgage brokers and others) to property technology or “PropTech” companies that offer innovative software, hardware, products, operations or services to improve property ownership, financing, valuation, operations, management, leasing and other aspects of the business.

This IPO consists of 20 million units at $10 each to trade on the NASDAQ.

Under “Risk Factors” starting on page 16 of the amended prospectus (S-1/A) filed July 16, 2020, with the SEC, this line appears in bold italics: Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”

Tuesday night pricing for Wednesday trading:

Montrose Environmental Group (MEG proposed), based in Irvine, California, says that since its inception in 2012, its mission has been to help clients and communities meet their environmental goals and needs. The company’s services include treating water contaminated with PFAS (chemicals known as perfluoroalkyl substances that science has linked to potential adverse effects such as liver damage, decreased fertility and cancer); managing air quality through the analysis of air and greenhouse gas emissions, and removing contaminants such as lead and arsenic from soil, the prospectus says.

This is an IPO of 10 million shares at $15 to $17 each to trade on the New York Stock Exchange.

Under “Risk Factors” starting on page 19 of the amended prospectus (S-1/A) filed July 14, 2020, with the SEC, this line appears:  The COVID-19 pandemic has adversely affected our business and may continue to do so.

Wednesday night pricing for Thursday trading:

Harbor Custom Development (HCDI proposed), based in Gig Harbor, Washington, is a real estate development company involved in building, marketing, selling and managing residential projects in Western Washington’s Puget Sound region. Its business strategy is focused on the acquisition of land to develop property for the construction and sale of residential lots, home communities and multi-family properties within a 30- to 60-minute commute to the Seattle metro employment corridor.

This is an IPO of 2.1 million shares at $6 to $8 each to trade on the NASDAQ.

Under “Risk Factors” beginning on page 8 of the amended prospectus (S-1/A) filed July 14, 2020, with the SEC, this line appears in bold italics: Any increase in unemployment or underemployment may lead to an increase in the number of loan delinquencies and property repossessions and have an adverse impact on us.

Jamf Holding (JAMF proposed), based in Minneapolis, describes itself as “the standard in Apple Enterprise Management,” noting that “our cloud software platform is the only vertically focused Apple infrastructure and security platform of scale in the world,” the prospectus says. Jamf Holding goes on to say: “We help organizations, including businesses, hospitals, schools and government agencies, connect, manage and protect Apple products, apps and corporate resources in the cloud without ever having to touch the devices.”

This is an IPO of 16 million shares at $17 to $19 each to trade on the NASDAQ.

Under “Risk Factors” beginning on page 22 of the amended prospectus (S-1/A) filed July 16, 2020, with the SEC, this line appears in bold italics: We derive a substantial portion of our revenue from one product.

Skillful Craftsman Education Technology Ltd (EDTK proposed), based in Jiangsu Province, China, is a provider of online education and technology services in China. The company says it has focused on vocational education since its inception in 2013, noting that its courses include instruction in mechanics, electronics, auto repair and construction, according to the prospectus.

This is an IPO of 3 million shares at $4.50 to $5.50 each to trade on the NASDAQ.

Under “Risk Factors” in the amended prospectus filed June 29, 2020, with the SEC, this line appears in bold italics: Our business, financial condition and results of operations may be adversely affected by a downturn in the global or Chinese economy.

Week of July 20 pricing:

Pershing Square Tontine Holdings Ltd. (PSTH.U proposed), based in New York, generated a big wave of headlines in the financial press on Monday, July 13, 2020, when it amended its S-1 prospectus to increase the IPO’s size to $4 billion by raising the number of units to 200 million – up by a third from 150 million in the original S-1 filing. The price remained at $20 each, twice the usual unit price for a SPAC.

This is a New York Stock Exchange listing. Its pricing date is listed only as “the week of July 20th.”

Since last Monday’s big splash, Wall Street hasn’t heard anything substantial about this blank-check IPO led by hedge fund billionaire Bill Ackman and his Pershing Square Capital Management. It’s on track to become the biggest IPO on record by a blank-check company, or special-purpose acquisition company (SPAC). The company wants to acquire a “mature unicorn,” the prospectus says.

The “Risk Factors” section of the amended prospectus begins on page 46 of the S-1/A filed on July 13, 2020, with the SEC, and it includes this line in bold: Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.

(For more information about these companies, check the IPO profiles on the IPOScoop.com website.)

Week of July 27th

Nothing has been scheduled so far for the week of July 27th. But that could change in a heartbeat when the SEC’s filing window opens again for business on Monday morning, July 20th.

Stay tuned.

Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO. The information offered is taken from sources we believe to be reliable, but we cannot guarantee the accuracy.

Disclosure: Nobody on the IPOScoop.com staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The IPOScoop.com staff does not issue advice, recommendations or opinions.