August IPO Recap – Judging IPO Boutique’s Performance

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In August, the IPO Market saw five companies go public for a total cash raise of $777.3m. This included just one offering that raised more that $150m — Venator Holdings (VNTR). Furthermore, in terms of cash raises, August’s total was the smallest amount in 2017 year-to-date, just below the $894m raised in July.

Price sensitivity played a role during the August IPO calendar as two deals (Ranger Energy Services & YogaWorks) priced below their original ranges. Those deals closed below their offering prices in their respective debut days’ and continue to trade poorly.

The success of IPOs in August was below the 2017 average. The average gain at first trade was 4.8% above the offering price — a decrease from the 16.6% average above the offering price at first trade that was posted in the previous month. August’s best deal was Clementia Pharmaceuticals (Nasdaq: CMTA) which posted a $3.25 premium at first trade versus the high-end pricing of $15.00–good for 21.7%. The average first-week high (as defined as trading session from open to close Friday during its opening week) was 8.8% above the offering price.

Compared to 2016, the IPO market remains well-ahead of last year’s pace. There have been 91 deals that have come to the market in 2017 versus 55 that came to market in this same period in 2016.

This recap will allow us to post our results and emphasize the value of IPOBoutique’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 August 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. In August 2017 we rated the Clementia Pharmaceuticals (CMTA) offering a ‘4’ and it produced a 21.7% gain at first trade ($3.25 above the offering price) and a 26.3% return at its opening week’s top-tick. This was IPO Boutique’s first ‘4’ rated deal since April 2017. Thus far in 2017 there have been nine ‘4’ rated IPOs, all have hit their designated targets, and  the collective group has averaged a $5.29 return above its offering price at first trade.

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 two deals debuted that we rated as a ‘three’ (YogaWorks and Ranger Energy Services). and neither hit IPO Boutique’s designated target. We have given 45 IPOs in 2017 a ‘3’ rating and those have produced, on average, a premium of $1.20 above the offering price at first trade.

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 two deals a ‘two-rating’ this past month and these deals had an average return of 5.6% above the offering price at first trade. So far in 2017 we have given a total of 33 IPOs a ‘2’ rating and they have produced, on average, just a $0.24 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 August, 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 IPOBoutique’s service: click here.