The IPO Buzz: Rough Start, Smooth Finish

When the IPO Calendar wakes up on the wrong side of Wall Street and everybody is smiling, something went right. The eight IPOs priced last week closed Friday with an average gain of 15.15 percent, while the major U.S. stock market indexes were mixed.

The Dow Jones Industrial Average ended the week with a gain of 0.41 percent and the S&P 500 Index edged up 0.02 percent, while the NASDAQ Composite Index lost 0.63 percent. In contrast, last week’s IPOs finished the week up 15.15 percent.

To recap: Bankers priced eight IPOs. One was a blank check company. One IPO was priced above range, another was priced within range, and five others were priced below range.

Pricing below range is usually a sign of too much stock being offered and not enough orders. In other words, there would be no aftermarket orders to give the IPO an opening pop. The theory had a flaw in it for the week of Oct. 15, 2018.

Osmotica Pharmaceuticals plc (OSMT), which is developing a drug to treat muscle spasticity in multiple sclerosis patients and a drug to treat droopy eyelid, was originally scheduled to price 8.3 million shares at $14 to $16 each on Wednesday, Oct. 10. It ran into resistance from buyers and brokers were said to be offering stock at $7, down 50 percent from the low end of its range. It didn’t work and the IPO was postponed.

The deal reappeared on last week’s calendar with new terms of 8.3 million shares at $7 each, but something new was added. The notice appeared on the cover of the prospectus. It said investment funds affiliated with Avista Capital Partners and affiliates of Altchem Limited have each indicated an interest in purchasing up to 1 million shares in the offering at the initial public offering price. That offer still did not sell all 8.3 million shares. The deal was priced Wednesday evening, Oct. 17th, at $7 each on 6.65 million shares. There was a major change in the final prospectus. The outside investors did indeed agree to buy 2 million shares at the IPO price, but in a private placement. Osmotica started trading Thursday morning, Oct. 18, at $9, up 28.6 percent from its IPO price.

At Friday’s close, Osmotica’s stock ended at $9.03 – up 29 percent from its offering price.

A $1.6 Billion Week

This week’s IPO Calendar features five new names plus one carryover – YayYo – with volume estimated at $1.64 billion. Once again, YayYo’s pricing is listed as “the week of” Oct. 22nd.

Let’s take a look at the five new deals on tap, organized by pricing and trading dates.

Tuesday evening for Wednesday morning trading:

Alberton Acquisition (ALACU proposed), based in Hong Kong, is a newly organized blank check company or special-purpose acquisition company (SPAC). Alberton says its efforts to locate a prospective target business will not be limited to a particular industry or geographic region.

Alzheon (ALZH proposed), based in Framingham, Massachusetts, is a clinical stage biopharmaceutical company with a late-stage program in Alzheimer’s disease and a discovery platform of small molecules for the inhibition of protein misfolding and aggregation in neurodegenerative disorders.

Wednesday evening for Thursday morning trading:

YETI Holdings (YETI proposed), based in Austin, Texas, describes itself as a rapidly growing designer, marketer and distributor of premium products for the outdoor and recreation market. The company is best known for its insulated YETI coolers and cups.

Thursday evening for Friday morning trading:

Gamida Cell Ltd (GMDA proposed), based in Jerusalem, is a clinical stage biopharmaceutical company leveraging its proprietary technology to develop cell therapies designed to cure cancer as well as rare, serious hematologic diseases.

StoneCo Ltd (STNE proposed), based in Sao Paulo, describes itself as “a leading provider of financial technology solutions that empower merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil.

Week of Oct. 29th

Four deals are on the IPO Calendar for the week of Oct. 29, 2018. Bankers aim to raise $199.08 million. But that could change when the U.S. Securities and Exchange Commission’s filing window opens again for business on Monday morning.

Stay tuned.


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