It may seem odd on the surface, but the market for initial public offerings (IPOs) in 2015 is about to get its true trial by fire. Three coincidental IPOs may determine the fate for how investors are willing to treat IPOs for much of the rest of 2015: Etsy, Party City and Virtu. If these do not live up to expectations, then we might very well have a quarter that is as slow for initial public offerings as the first quarter.
The good news is that the last dozen or so IPOs have had good performance, with Tantech Holdings Ltd. (NASDAQ: TANH) doubling out of the chute, and now the shares of the Chinese bamboo-based charcoal products are up 200%. And another IPO named Aduro Biotech Inc. (NASDAQ: ADRO), for its cancer immunotherapy, has doubled out of the chute on Wednesday.
The bad news is that the first quarter in IPOs was very slow, and the number was so small that secondary offerings outnumbered IPOs by almost nine to one. With the market at all-time highs, it might not be the best advertising placard for companies and insiders to be raising cash while the number of new companies is getting a cold shoulder.
Etsy, Party City and Virtu are all supposed to price on Wednesday night or Thursday morning, which means they should all trade Thursday, if no delays are coming.
Etsy Inc. (NASDAQ: ETSY) is a great website and online marketplace for craftspeople to buy and sell handmade goods. The company plans to offer 16.7 million shares in an expected price range of $14 to $16 per share, bringing in $250 million or so with a market cap of about $1.7 billion. Goldman Sachs and Morgan Stanley are leading the deal. One issue that has been brought up about Etsy is that some of the company’s claims in the past may not have matched the filing figures.
Party City Holdco Inc. (NYSE: PRTY) is the party goods retailer you see all over North American cities. It has about 880 stores in the United States and Canada, and this went private during the private equity boom. The company will sell 21.9 million shares at $15 to $17 per share, raising around $350 million, and with an implied market cap of close to $1.9 billion. The bookrunners are Goldman Sachs, Bank of America Merrill Lynch, Credit Suisse, Morgan Stanley, Barclays, Deutsche Bank and JPMorgan.
Virtu Financial Inc. (NASDAQ: VIRT) is the first of its kind to go public — a high-frequency trading (HFT) firm, and a market maker. The HFT angle is the big focus here. After all, it never loses money (except for one day). This HFT shop is offering 16.5 million shares in an expected price range of $17 to $19, raising close to $300 million and giving an implied market cap of about $2.5 billion. The bookrunners are Goldman Sachs, JPMorgan, Sandler O’Neill, BMO Capital Markets, Citi, Credit Suisse, Evercore Partners and UBS Investment Bank. Imagine never losing money trading; it would be like shooting fish in a barrel.
There are of course other IPOs to watch, but these are the companies that are very prominent and very recognizable to investors and the public alike. If these go well, we should see an accelerated IPO calendar. If these flop, the exit doors may be a lot less accessible for a while.
Just last week, 24/7 Wall St. asked if GoDaddy Inc. (NYSE: GDDY) was an IPO in trouble. The good news is that has managed to hang above $25, but with shares at $25.65 that IPO is not yet out of the woods.
Stay tuned. The balance of the IPO market for the rest of 2015 could swing for the better or could swing for the worse on Thursday.