May was the second most active month year-to-date for the IPO Market as 17 companies went public for a total cash raise of $3.46bn. This included two deals that each raised greater than $800m — Antero Midstream GP (NYSE: AMGP) and Gardner Denver Holdings (NYSE: GDI).
Price sensitivity played a major role in the month of May with six deals being priced below range and only two pricing above range. Of the six deals that priced below range, four opened 6% or greater above the offering price. The average gain at first trade for the month of May was 5.3% above the offering price — a decline from the 10.8% average gain above the offering price at first trade that was posted in April. May’s best deals were Appian Corporation, Biohaven Pharmaceutical (NYSE: BHVN) and Guaranty Bancshares (NASDAQ: GNTY) with gains of 25.0%, 17.6% and 11.1%, respectively, at first trade. Healthcare related deals made a ‘comeback’ in May as five of these sector-specific deals priced compared to just two healthcare deals pricing during the months of February, March and April combined.
Compared to 2016, the IPO market is well-ahead of last year’s pace. There have been 59 deals that have come to the market in 2017 versus 28 that came to market over this same period in 2016.
This recap will allow us to post our results and emphasize the value of IPO Boutique’s senior managing partner Scott Sweet’s ratings. You can check out our entire track record at this link.
Five-Rating
We consider these IPOs to be the best of the best. In our nine years of keeping a track-record we have given just 14 ‘five-ratings’ and all 14 have hit their respective targets. However, in May 2017, we did not give a ‘five’ rating.
Four-Rating
We consider these IPOs to be very strong buys and we anticipate 1-to-2 points of premium or higher in the first week of trading. However, in May 2017, we did not give a ‘four’ rating.
Three-Rating
We consider these IPOs to be moderate buys and we anticipate 1/2 to 1 point premium or more likely in the cases of these new issues. This past month seven deals debuted that we rated as a ‘three’ with an average return of 6.9% above the offering price. The best ‘3’ rated deal this month were Appian Corporation (Nasdaq: APPN) and Biohaven Pharmaceutical (NYSE: BHVN) which each opened $3.00 above their respective offering price. We have given 29 IPOs in 2017 a ‘3’ rating and those have produced, on average, a premium of $1.08 above the offering price at first trade.
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Two-Rating
We consider these IPOs to be “neutral” and thus do not have a particular point threshold to hit in order for us to deem it as ‘hitting its target’. We gave ten deals a ‘two-rating’ this past month and these deals had an average return of 4.17% above the offering price at first trade. So far in 2017 we have given a total of 21 IPOs a ‘2’ rating and those 21 have produced, on average, just a $0.38 return above the offering price at first trade.
One-Rating
We advise our subscribers to avoid these IPOs as we consider them to be risky. In our nine years of keeping a track-record we have given just 49 ‘one’ ratings. In May, we did not give a ‘one’ rating.
IPOBoutique.com provides comprehensive research, ratings and daily advisories on new issues hitting the IPO market. To subscribe to IPO Boutique’s service: click here.
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