The IPO Buzz: The IPO Waiting Game

November’s IPO calendar looks much like the ones from the recent past. Several are true IPOs and some are mislabeled. Nevertheless, the big question is: “Where is the IPO market?”

The answer could be: Probably not too far behind the current U.S. stock market. Consider the following:

  • In October 2015, the major U.S. stock market indexes turned in their best monthly performance since 2011.
  • The stock indexes have each come back over 10 percent from their correction lows on Aug. 25, 2015.
  • In past years, the IPO calendar has started to come to life about four to six weeks after a U.S. stock market bottom. It has been 10 weeks since that low.
  • Today’s calendar is in the hands of the buyers, who are insisting on reasonable pricings. Seventeen IPOs were priced in October (excluding four unit offerings) and 15 of those 17 were priced below their original filing terms. Eleven closed their opening day as winners. The average opening-day gain was 2.09 percent for October’s 17 IPOs. At the close on Friday, Oct. 30 – the day before Halloween – 10 were still in the winner’s circle and the average gain was 5.62 percent from the IPO price for all 17.
  • The world waits for those in the IPO pipeline to start reporting third-quarter financials by amending their filings with the U.S. Securities and Exchange Commission. When that happens, these pipeline companies are most likely to file their IPO terms and set a pricing date at the same time. Those are the signals that these companies will move forward to go public.
  • And soon it will be bonus time for bankers. They have about six weeks left in the year to make up some of the difference between this year’s traffic of 137 IPOs and 2014’s volume of 268 IPOs.

November’s Quiet Start

Now let’s turn to this week and its calendar of five deals. Two are true IPOs, one is a “best efforts” offering, and the other two are cases of mistaken identities.

The two true IPOs are GenSight Biologics S.A. (GNST – proposed) and Xtera Communications (XCOM – proposed). The “best efforts” offering is Fuling Global (FORK – proposed). The mislabeled deals or cases of mistaken identities are First Guaranty Bancshares (FGBI – actual) and Kura Oncology (KURA – proposed) (KURO – actual). Let’s take a look at these first.

The Dog Kennel Theory

It has been said that if one dog barks at something, the rest of the kennel springs to life and barks at the noise. That is pretty much the pattern that various reporting services follow in constructing their IPO calendars. One service will report a pricing date for a deal that is not a true IPO and the rest follow suit. There is nothing wrong with this, but it has caused some misunderstandings.

(Note: Because of this, lists them for information purposes only and does not issue a SCOOP rating.)

Here is the skinny on those two.

First Guaranty Bancshares is a bank holding company headquartered in Hammond, Louisiana. Through its owned subsidiary, First Guaranty Bank, it provides personalized commercial banking services mainly to Louisiana customers through 21 banking facilities located in the metropolitan statistical areas of Hammond, Baton Rouge, Lafayette and Shreveport-Bossier City.

  • From its prospectus: “We are offering 750,000 shares of our common stock, par value $1.00 per share. Shares of our common stock are quoted on the OTC Pink Marketplace operated by the OTC Markets Group, Inc., or OTC Pink, under the symbol “FGBI” and trading in our common stock also occurs through First Guaranty Bank, our co-transfer agent. On October 23, 2015, the last reported sales price for shares of our common stock as reported on the OTC Pink and as reported to First Guaranty Bank, our co-transfer agent, was $21.00 per share and $20.74 per share, respectively.”
  • Investors can buy what they want before the pricing date in the middle of the week of Nov. 2nd.

Kura Oncology is a clinical stage biopharmaceutical company advancing a pipeline of precision medicines to treat solid tumors and blood cancers, including certain types of lymphoma and leukemia. The company is based in La Jolla, California.

  • From its prospectus: “We are offering $60,000,000 of shares of our common stock or, assuming a public offering price of $16.00 per share, the last reported sale price of our common stock on the OTC Markets—OTCQB tier, or OTCQB, on October 27, 2015.”
  • Investors can buy what they want before the pricing date on Wednesday evening, Nov. 4.

The “Best Efforts” Deal

Fuling Global, based in China, is a specialized production and distribution company for environmentally friendly plastic serviceware with primary customers from the United States and Europe. The company provides disposable plastic food service products that are used by McDonald’s, Subway, Wendy’s, Burger King, KFC (China only), Walmart, McKesson, Woolworth’s and more than 100 other customers. A “best efforts” deal is not being underwritten. Its “underwriter” acts as an agent to make its best effort to distribute whatever number of shares it can.

Two True IPOs

The real IPO action will come near the end of the week, when two companies are set to go public. One is a biotech from France. The other is a telecom that hails from Texas.

GenSight Biologics S.A., based in Paris, is a clinical stage biotechnology company focusing on discovering and developing novel therapies for mitochondrial and neurodegenerative diseases of the eye and central nervous system. The company is working on gene therapies to prevent blindness or restore vision in people who have rare diseases of the retina.

Founded in 2012, the company has about 23 employees.

Bankers expect to offer 4.65 million American Depositary Shares at $13 to $15 each to raise $65.1 million on Thursday evening. The shares are expected to trade on the NASDAQ Global Market on Friday morning, Nov. 6, 2015.

(For more information, please click here: GenSight Biologics S.A.)

Xtera Communications, based in Allen, Texas, is a telecommunications infrastructure company. Xtera provides optical transport solutions to deploy and manage optical networks worldwide. It offers optical transport solutions to telecommunications service providers, content service providers, enterprises and government entities to support their deployments of long-haul terrestrial and submarine optical cable networks.

Founded in 1998, the company has about 102 employees.

Bankers expect to offer 5.5 million shares at $9 to $11 each to raise $55 million on Thursday evening. The shares are expected to trade on the NASDAQ Global Market on Friday morning, Nov. 6, 2015.

(For more information, please click here: Xtera Communications)

At press time, next week’s calendar had just one deal. But it is early – and anything can happen.

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 opinions.