The IPO market has always been divided between the haves and the have-nots. Last week’s traffic underscored this division. Early warning signals were sent even before the IPOs started trading.
That raises the question: How to tell a have from a have-not before an IPO starts trading?
The answer: Check the IPO’s final pricing terms against its most recent preliminary prospectus.
If the deal is priced within or above its recent filing range, expect an opening premium of varying degrees.
If the IPO is priced below its recent filing range, expect a lackluster opening performance.
Wall Street, of course, is a place where the numbers tell the story. And there is nothing like bringing out the numbers to back up a statement.
Let the Numbers Do the Talking
Last week five IPOs were priced, according to the U.S. Securities and Exchange Commission filings. (Note: Excluded are unit offerings and foreign companies offering American Depositary Shares in the U.S. capital markets. These are basically secondary offerings as their underlying shares were already being traded in other markets.)
Last week’s scorecard for five IPOs:
- One was priced ABOVE its filing range and started trading 18.5 percent ABOVE its initial public offering price.
- Four were priced BELOW their filing ranges and started trading 4.28 percent BELOW the IPO prices.
- May 2015 scorecard for 13 IPOs so far:
- Eight IPOs were priced WITHIN OR ABOVE their filing ranges and started trading 10.6 percent ABOVE the IPO price.
- Five IPOS were priced BELOW their filing ranges and started trading 7.82 percent BELOW their IPO prices.
2015 scorecard for 58 IPOs priced so far:
- 36 IPOs were priced WITHIN AND ABOVE their filing ranges and started trading 24.5 percent ABOVE the IPO price.
- 22 were priced BELOW their filing ranges and started trading 0.3 percent BELOW the IPO price.
2000 through 2014 scorecard for 2,511 IPOs priced:
- 1,654 IPOs were priced WITHIN AND ABOVE their filing ranges and started trading 27.2 percent ABOVE the IPO price.
- 857 IPOs were priced BELOW their filing ranges and started trading 1.27 percent ABOVE their initial offering prices.
Mortgage Data and Mobile Shopping
This brings us to this week’s calendar of seven IPOs expecting to raise $1.1 billion. And guess what? There are a couple of early favorites from the IPO players: Black Knight Financial Services (BKFS – proposed) and Shopify (SHOP – proposed).
Black Knight Financial Services is a Jacksonville, Florida-based provider of integrated technology, workflow automation and data and analytics to the mortgage industry. The company believes it has market leading positions in mortgage processing and technology solutions combined with comprehensive real estate data and extensive analytic capabilities. Black Knight Financial says its solutions are used by 21 of the 25 largest U.S. mortgage originators and all of the 25 largest U.S. mortgage servicers, as well as other financial institutions, investors and real estate professionals, to support mortgage lending and servicing operations, analyze portfolios and properties, operate more efficiently, meet regulatory compliance requirements and mitigate risk.
Worth noting from Black Knight’s prospectus:
The company’s biggest shareholders, before the IPO, are Fidelity National Financial, a title insurance company, and affiliates of Thomas H. Lee Partners, one of the oldest names in private equity.
(For more information, please click here: Black Knight Financial Services)
Shopify is an Ottawa-based provider of a cloud-based commerce platform designed for small and medium-sized businesses. The company’s clients use its software to run their business across all of their sales channels, including web, tablet and mobile storefronts, social media storefronts, as well as brick-and-mortar stores and pop-up shops.
In its prospectus, Shopify says:
“While we started Shopify to help merchants design, set up and manage their online stores, we have expanded far beyond that. Whether a merchant is starting their business online or offline, we provide a platform for merchants to create an omni-channel experience that helps showcase the merchant’s brand and grow its business. The Shopify platform provides merchants with a single view of their business and customers across all of their sales channels and enables them to manage products and inventory, process orders and payments, build customer relationships and leverage analytics and reporting. Merchants can also use Shopify Mobile, our iPhone and Android application, to manage their business on the go.”
(For more information, please click here: Shopify)
Looking into next week, the IPO calendar is clean and green. Nevertheless, the calendar has been known to fill up quickly on Monday mornings.
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.