AdvancePierre Food Holdings capped a good week for the IPO markets. They priced 18.6 million shares at $21, the middle of the price talk of $20-$23, and opened at $23.50. That’s a respectable opening for a food company, particularly following the success of US Foods in late May.
AdvancePierre is following a typical pattern for IPOs this year: investors want companies that are profitable or have a clear path to profitability. The company is indeed profitable, enough to pay a dividend of 2.6 percent at the midpoint of the price range.
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It caps a strong week for IPOs, and it’s about time. As I’ve said time and time again, the most important determinant of the health of the IPO market is the state of the overall stock market. With the S&P 500 at historic highs, the IPO business is running out of excuses.
Line’s strong debut yesterday, up 27 percent, has a lot of IPO watchers finally declaring the long IPO winter over.
“The success of Line is sending a clear message that the IPO market is open for business,” Kathleen Smith of Renaissance Capital told me.
They run the Renaissance IPO ETF (IPO), a basket of the 60 most recent IPOs, which is up 22 percent since the February 11th bottom, outperforming the S&P 500’s roughly 17 percent gain.
It’s not just Line–while there have been far fewer IPOs than normal this year (44), they have produced an average return of 18 percent, a respectable showing.
And the big-name IPOs have had surprisingly strong returns:
(from initial price)
Twilio: 178 percent
Acacia Communications: 128 percent
BATS Global Markets: 36 percent
MGM Growth: 26 percent
Line: 23 percent
US Foods: 9 percent
SecureWorks: 6 percent
Line, MGM Growth, and US Foods are the three largest IPOs of the year, and the fact they have had such strong showings will encourage others to step forward quickly.
Smith noted that on Monday, five roadshows launched–more than we’ve seen in a single day all year.
Next week, we get Patheon, the world’s largest contract drug manufacturer (it would be the fourth largest IPO this year), and the week after Talend, which helps companies standardize big data bases. Talend would be the second enterprise software company to go public after Twilio.
How about those Silicon Valley unicorns waiting to public? A lot of interest is focused on Spotify. They completed a $1 billion convertible debt offering at the end of March. The interest rate is 5 percent, but the rate increases 1 percent every six months until it reaches 10 percent or until they conduct an IPO.