Summary
- It was another busy week for the fall IPO market as 13 IPOs raised $4.6 billion led by restaurant payment processor Toast, which jumped 56% in its debut.
- Six SPACs also went public, and one IPO postponed: Canadian consumer products company Knowlton Development.
- The pipeline was fairly active, with seven IPOs and five SPACs submitting initial filings.
It was another busy week for the fall IPO market as 13 IPOs raised $4.6 billion led by restaurant payment processor Toast (TOST), which jumped 56% in its debut. Six SPACs also went public, and one IPO postponed: Canadian consumer products company Knowlton Development (KDC). The pipeline was fairly active, with seven IPOs and five SPACs submitting initial filings.
Toast priced above the upwardly revised range to raise $870 million at a $22.9 billion market cap. Toast provides a suite of integrated payment and software solutions that are designed to streamline restaurant operations. The company grew ARR over 100% in the 1H21, though it has historically been unprofitable, and growth could slow as tailwinds from restaurants reopening abate. Toast finished up 39%.
Software firm Clearwater Analytics (CWAN) priced above the range to raise $540 million at a $4.4 billion market cap. Clearwater provides its 1,000+ clients with cloud-native software that allows them to simplify their investment accounting operations, and the company has a 100% recurring revenue model. A new investor and certain existing shareholders had indicated on $150 million of the IPO. Clearwater finished up 41%.
Customer engagement software provider EngageSmart (ESMT) priced above the range to raise $378 million at a $4.4 billion market cap. The company provides software that simplifies online workflows like paperless billing, electronic payment processing, scheduling, and client communication. While growth may slow post-pandemic, EngageSmart has a sticky customer based and a long track record of profitability. EngageSmart finished up 34%.
The largest deal of the week, Freshworks (FRSH) priced above the upwardly revised range to raise $1.0 billion at an $11.6 billion market cap. The company’s core product is its customer support software, and it also offers IT service management software and a nascent competitor to CRM solutions. While losses are expected to increase with S&M spending, Freshworks has delivered solid growth and 100%+ net dollar-based revenue retention as of 6/30/21. Freshworks finished up 30%.
Jewelry retailer Brilliant Earth Group (BRLT) downsized and priced below the range to raise $100 million at $1.0 billion. Brilliant Earth is a digital-first jewelry company and a global leader in ethically sourced fine jewelry. The company has sold to consumers in all US states and over 50 countries, and has served over 370,000 customers through its e-commerce platform and 13 showrooms. Brilliant Earth finished up 27%.
COVID-19 test maker Cue Health (HLTH) priced at the midpoint to raise $200 million at a $2.4 billion market cap. Cue’s first commercially available diagnostic test for use with its Cue Health Monitoring System is its COVID-19 Test Kit, which has been authorized by two EUAs. Cue has five additional Test Kits in late-stage technical development, for which it expects to begin seeking FDA authorization or clearance in 2H22. Cue Health finished up 25%.
Hiring solutions provider Sterling Check (STER) priced above the range to raise $329 million at a $2.3 billion market cap. Sterling is one of the leading US providers of background checks for corporate and government customers. The company serves more than 50% of the Fortune 100, often with exclusive contracts, though it operates in a highly competitive market. Sterling finished up 15%.
Food company Sovos Brands (SOVO) priced below the range to raise $280 million at a $1.2 billion market cap. Formed by Advent International, Sovos Brands offers a select group of acquired premium food brands. Profitable with solid growth, its largest brand of products, Rao's, included the #1 selling SKU in the pasta and pizza sauce category. Sovos finished up 14%.
London-listed crypto mining company Argo Blockchain (ARBK) raised $113 million at a $697 million market cap. Argo states that it is a leading blockchain technology company focused on large-scale mining of Bitcoin and other cryptocurrencies. Argo has a fleet of more than 21,000 purpose-built computers (mining machines) and can generate more than 1,075 petahash per second. Argo finished up 11%.
Canadian bank VersaBank (VBNK) raised $55 million at a $266 million market cap. VersaBank is a Canadian Schedule I chartered bank and states that it is one of the world's first fully digital financial institutions. As of July 31, 2021, VersaBank had $1.8 billion in assets, $1.6 billion in loans, $1.5 billion in deposits, and $202 million in stockholders' equity. VersaBank finished up 10%.
Global money transfer firm Remitly Global (RELY) priced above the range to raise $523 million at an $8.1 billion market cap. Remitly provides digital financial services for immigrants and their families in over 135 countries, and it has expanded its core cross-border remittance product to over 1,700 corridors worldwide. The company is unprofitable but has demonstrated growth and margin improvement. Remitly finished up 3%.
Online fashion platform a.k.a. Brands (AKA) downsized and priced below the downwardly revised range to raise $110 million at a $1.4 billion market cap. a.k.a. acquires digitally-focused fashion brands oriented toward millennial and Gen Z consumers, starting with its acquisition of Princess Polly in 2018. The company has a long runway to grow its brands in the US, but its M&A strategy carries execution risk. a.k.a. finished down 9%.
Personalized supplements seller Thorne HealthTech (THRN) downsized and priced at the low end of the downwardly revised range to raise $70 million at a $611 million market cap. The company’s vertically integrated brands, Thorne and Onegevity, provide actionable insights and personalized data, products, and services. While it has delivered strong growth, long-term differentiation in the space will rely on the unproven Onegevity. Thorne finished down 17%.
Six SPACs raised $1.2 billion led by Kingstown Capital’s Inflection Point Acquisition (IPAXU), which raised $300 million.
| 19 IPOs During the Week of September 20th, 2021 | |||||
|---|---|---|---|---|---|
| Issuer Business | Deal Size | Market Cap at IPO | Price vs. Midpoint | First Day Return | Return at 09/24 |
| Clearwater Analytics (CWAN) | $540M | $4,426M | 20% | +41% | +41% |
| Provides cloud-native software for investment accounting and analytics. | |||||
| Toast (TOST) | $870M | $22,858M | 27% | +56% | +39% |
| Provides mobile and digital payment processing and other services for restaurants. | |||||
| EngageSmart (ESMT) | $378M | $4,447M | 8% | +31% | +34% |
| Provides SaaS solutions for invoicing, payments, and health practice management. | |||||
| Freshworks (FRSH) | $1,026M | $11,576M | 20% | +32% | +30% |
| Provides a business SaaS for customer support and IT projects. | |||||
| Brilliant Earth Group (BRLT) | $100M | $1,035M | -20% | +43% | +27% |
| Digital-first retailer of ethically sourced fine jewelry. | |||||
| Cue Health (HLTH) | $200M | $2,429M | 0% | +25% | +25% |
| Develops and sells molecular home tests for COVID-19 and other diseases. | |||||
| Sterling Check (STER) | $329M | $2,341M | 10% | +17% | +15% |
| Provides tech-enabled background screening and identity verification services. | |||||
| Sovos Brands (SOVO) | $280M | $1,169M | -20% | +13% | +14% |
| Sells premium food brands including Rao's and noosa. | |||||
| Argo Blockchain (ARBK) | $113M | $697M | 0% | +12% | +11% |
| Blockchain technology company focused on large-scale crypto mining. | |||||
| VersaBank (VBNK) | $55M | $266M | 0% | +5% | +10% |
| Canadian digital bank. | |||||
| Remitly (RELY) | $523M | $8,056M | 8% | +13% | +3% |
| Provides a mobile payment service for international money transfers. | |||||
| HHG Capital (HHGCU) | $50M | $65M | 0% | +2% | +2% |
| Blank check company targeting established businesses with strong free cash flow. | |||||
| GigCapital5 (GIA.U) | $200M | $258M | 0% | +1% | +1% |
| Fifth blank check company led by semiconductor veteran Avi Katz. | |||||
| Argus Capital (ARGUU) | $265M | $331M | 0% | +1% | +1% |
| Blank check company led by former ViacomCBS/CBS executives targeting media, entertainment, and sports. | |||||
| Direct Selling Acq. (DSAQ.U) | $200M | $250M | 0% | +1% | +1% |
| Blank check company targeting domestically-based direct selling businesses. | |||||
| Live Oak Crestview Acq. (LOCC.U) | $200M | $250M | 0% | n/a | +0% |
| Blank check company formed by Live Oak Merchant Partners and Crestview. | |||||
| Inflection Point Acq. (IPAXU) | $300M | $375M | 0% | -2% | -1% |
| Blank check company formed by Kingstown Capital targeting consumer and tech. | |||||
| a.k.a. Brands (AKA) | $110M | $1,400M | -39% | -9% | -9% |
| Operates a portfolio of Millennial and Gen Z online fashion brands. | |||||
| Thorne HealthTech (THRN) | $70M | $611M | -29% | -25% | -17% |
| Offers a suite of personalized dietary supplements. | |||||
Seven IPOs submitted initial filings. Pan-Asian life insurer FWD Group Holdings (FWD) filed for an estimated $2 billion IPO. Water pipeline operator Aris Water Solutions (ARIS), convenience store chain Yesway (YSWY), and orthopedic medical device company Paragon 28 (FNA) all filed to raise $100 million.
Diagnostic test maker Lucid Diagnostics (LUCD) filed to raise $58 million, Chinese wheelchair maker Jin Medical International (JNMI.RC) filed to raise $33 million, and air purification device maker AeroClean Technologies (AERC) filed for a $28 million Reg A+ IPO.
Five SPACs submitted initial filings led by Enterprise 4.0 Technology Acquisition (ENTFU), which filed to raise $250 million.
| 12 Filings During the Week of September 20th, 2021 | |||
|---|---|---|---|
| Issuer Business | Deal Size | Sector | Lead Underwriter |
| Blockchain Moon Acq. (BMACU) | $100M | SPAC | Chardan |
| Blank check company targeting blockchain technology businesses in North America, Europe, and Asia. | |||
| Enterprise 4.0 Tech Acq. (ENTFU) | $250M | SPAC | Cantor Fitz. |
| Blank check company targeting 'Enterprise 4.0' businesses. | |||
| Henley Park Acquisition (HPACU) | $175M | SPAC | Maxim |
| Blank check company led by a former Ford executive targeting the ACES sectors. | |||
| Jin Medical International (JNMI.RC) | $33M | Health Care | Prime Num. Cap. |
| Chinese wheelchair manufacturer. | |||
| Paragon 28 (FNA) | $100M | Health Care | BofA |
| Makes medical devices for the foot and ankle orthopedic market. | |||
| Vision Sensing Acq. (VSACU) | $88M | SPAC | EF Hutton |
| Blank check company targeting businesses developing vision sensing technologies. | |||
| Aris Water Solutions (ARIS) | $100M | Industrials | Goldman |
| Operates a water pipeline for the oil and gas fracking industry. | |||
| FWD Group (FWD) | $2,000M | Financials | Morgan Stanley |
| Pan-Asian life insurer founded by billionaire Richard Li. | |||
| Lucid Diagnostics (LUCD) | $58M | Health Care | Cantor Fitz. |
| Makes diagnostic tests for esophageal precancer and cancer. | |||
| Sanaby Health Acq. I (SANBU) | $150M | SPAC | BTIG |
| Blank check company targeting the healthcare sector. | |||
| AeroClean Technologies (AERC) | $28M | Consumer Discretionary | Benchmark |
| Makes air purification devices. | |||
| Yesway (YSWY) | $100M | Consumer Staples | Morgan Stanley |
| Operates a chain of convenience stores under the Yesway and Allsup's brands. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 9/23/2021, the Renaissance IPO Index was up 9.0% year-to-date, while the S&P 500 was up 18.4%. Renaissance Capital's IPO ETF (NYSEARCA:IPO) tracks the index, and top ETF holdings include Moderna (NASDAQ:MRNA) and Uber Technologies (NYSE:UBER).
The Renaissance International IPO Index was down 14.4% year-to-date, while the ACWX was up 9.0%. Renaissance Capital’s International IPO ETF (NYSEARCA:IPOS) tracks the index, and top ETF holdings include SoftBank (OTCPK:SFTBY) and Meituan-Dianping (MEIT).
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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