September IPO Recap – Judging IPO Boutique’s Performance

SUBSCRIBE TO IPOBoutique’s Free Weekly Newsletter

In August, the IPO Market saw 14 companies go public for a total cash raise of $2.51bn. This included just one offering that raised more that $500m — PQ Group Holdings (PQG) —  but also a heavy contingency of foreign offerings. Five out of the 14 IPOs this past month were Asian related.

Price sensitivity played a role in the two largest cash raises of the month (BEST Inc (BSTI) & PQ Group Holdings (PQG)) as well as the lone energy offering. The BEST Inc offering appeased the buy-side enough to produce a 14.8% return at first trade while PQG did not fare as well…opening down 2.9%. Oasis Midstream Partners (OMP) priced at $17.00 (well below the $19-$21) range and opened at $16.75.

There was just one offering that priced above its range, RYB Education (RYB). RYB opened with a 30.4% return above the offering price at first trade. There were plenty of other offerings with considerable strength as three deals priced at the high end of their respective ranges.

The success of IPOs in September was above the 2017 average. The average gain at first trade was 11.5% above the offering price — an increase from the 4.8% average above the offering price at first trade that was posted in the previous month. September’s best deal was Roku Inc (ROKU) which more than doubled in its first two sessions as a publicly traded company. 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 105 deals that have come to the market in 2017 versus 71 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 September 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 September 2017 we rated the RYB Education (RYB) offering a ‘4’ and it produced a 30.4% return at first trade. Thus far in 2017, there have been ten ‘4’ rated IPOs, all have hit their designated targets, and the collective group has averaged. 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 $5.34 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 eight deals debuted that we rated as a ‘three’ and seven have hit their respective targets. The two best ‘3’ rated deals were Zai Lab Limited (ZLAB) and Nightstar Therapeutics (NITE), which opened at 34.7% and 23.2% above the offering price, respectively, at first trade. The average gain at first trade for the seven was 13.9% above the offering price. We have given 53 IPOs in 2017 a ‘3’ rating and those have produced, on average, a premium of $1.37 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 five deals a ‘two-rating’ this past month and these deals had an average return of 3.9% above the offering price at first trade. So far in 2017 we have given a total of 38 IPOs a ‘2’ rating and they have produced, on average, just a $0.22 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 September, 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.