NEW YORK, Oct 20 (IFR) - The US IPO market has hit its stride, but more aggressive pricing by issuers is threatening to snuff out easy gains.
Four out of five scheduled IPOs priced in the past week for total proceeds of US$2.1bn, the most raised since the week beginning June 18.
Yet three of the four deals that priced were Asian companies - Chinese tech-enabled lender Qudian (US$900m) and English language training company Rise Education (US$159.5m), and Singapore-based online gaming company Sea (US$885m).
The sole local debutante was database software company MongoDB (US$192m), while LiveXLive Media, the week's most speculative proposition, failed to price.
Pricing outcomes confirmed the trend of more robust valuations. All of the four deals that priced did so above their marketing ranges and MongoDB did so even after increasing its range earlier in the week. In the case of Sea in particular, that limited aftermarket gains. In early trading after its debut on Friday, Sea traded as high as US$16.99 but also traded as low as US$14 versus its US$15 IPO price.
The coming week brings more deals but with a more local flavour.
Heading the slate of six IPOs is the US$892.5m IPO of MLP BP Midstream Partners, a test for the MLP sector after a long stretch of underperformance.
KKR-backed National Vision is seeking US$316m and Belgian biotech Ablynx US$175m, but given the appeal of tech IPOs right now, cybersecurity software provider ForeScout Technologies (US$105.6m) is likely to get the most attention.
On the follow-on front, a deluge of earnings will limit deal flow but it could begin to pick up from very subdued levels in the past week, which saw just a handful of pricings.
Looking further out, Altair Engineering, which launched a US$156m IPO on Thursday, might be the conservative tech investor’s antidote for the current IPO frenzy.
Altair, an engineering software company founded in 1985, is much more mature than the average tech IPO.
The terms, 12m shares at US$11-$13 each, value the company at US$785.2m versus run-rate revenues of about US$317m this year.
In another novelty, the company is controlled by management, not VC funds.
The historical numbers show minimal growth but the company has made acquisitions to strengthen its growth profile.
Flash numbers show third-quarter revenues rising 6%-8% to US$82.6m-$84.2m, though pure software revenues growth is running at a faster 10%-12% clip. Pre-tax profit (before stock comp expenses) was US$2.9m-$3.2m and operating cashflows were US$17m-$17.5m in the same quarter.
JP Morgan, RBC Capital Markets and Deutsche Bank expect to price the deal on October 31. (This story will appear in the October 21 issue of IFR Magazine; Reporting By Anthony Hughes)