US IPO filing activity picked up pace Friday, breaking through a protracted lull this year and adding at least three new names to a growing list of potential launches after the Labor Day holiday.
Regional bank FB Financial (First Bank), biotech Thar Pharmaceuticals and software company Everbridge all registered with the SEC to go public, another signal that IPO deal flow is poised for a marked increase after a tough year to date.
Having already filed confidentially, these deals could launch after a 15-day wait (as per filing rules), most likely after the September 5 holiday and as bankers and investors return from summer holidays.
The number of companies publicly filing for an IPO has slumped this year, dropping to just 76 this year from 177 by the end of August in 2015. This echoes the sharp 50%-plus decline in deals that have gone on to price this year, according to Renaissance Capital data.
Two of these companies (FirstBank and Everbridge) first filed confidentially last year but have been stuck in the backlog. That has kept them out of the public eye while issuers have remained reluctant to launch deals into a market where the new issue discount has widened.
Investors have had the upper hand in price negotiations this year after absorbing a large disappointing batch of deals in 2015.
The aftermarket performance from 2016’s 59 IPOs (including seven in August) has been much better, averaging a 30% gain versus a 2% decline from last year’s new deals (the latter an improvement from -20% earlier this year) based on Renaissance’s numbers.
Big expectations
JP Morgan, this year’s busiest US equity underwriter, has publicly said it has 20 deals globally that could launch in September, of which a large proportion would likely comprise US deals.
Other banks are more cautious about the likely deal flow but do expect a material pick-up and IPOs to emerge from the technology, financial services, industrial and retail sectors through to the end of the year.
Yet to see an immediate pick-up in IPO volumes in September, more companies would need to show their hand through a public filing in the next two weeks.
The passage to public markets is not obstacle-free.
November’s Presidential election and concerns about market volatility associated with US monetary policy could yet frustrate IPO aspirants, though the equity market’s near record levels and stable conditions in the past month have improved the issuance backdrop.
JP Morgan is one of three bookrunners (with UBS and KBW) on the pending IPO of Nashville-based FirstBank, which filed for a US$115m NYSE offering Friday afternoon.
The offering would comprise both primary and secondary shares, according to the filing, though US$55m of the primary proceeds will fund a non-taxable cash distribution to sole shareholder and chairman James Ayers.
First Bank is the eighth biggest bank in Tennessee by total deposits and assets and the second largest with assets under US$15bn.
However, the IPO has been on ice for a considerable period given it first filed confidentially in September 2015, suggesting (like many others in the calendar) this deal is coming later than initially expected.
Software comeback
The same might be said for Everbridge, the public safety communications software firm that filed for a US$90m IPO with Credit Suisse and Bank of America Merrill Lynch leading a seven-firm syndicate.
A confidential draft registration statement was first filed in July last year. There have been six confidential amendments since and prior to Friday’s filing.
Everbridge has a relatively small revenue base (US$58.7m last year and US$35.6m for the first half of 2016) but is growing its top-line at a rate of about 30%.
The company made a US$6m net loss in the first half and reported gross margins of 69%.
Almost all of its revenue comes from sales of a mass notification application that automates the process of warning staff of threats such as active shooter situations, terrorist attacks, IT outages and severe weather conditions.
Some bankers are hoping the market is even strong enough to support deals that carry the stigma of an earlier postponement.
Sponsor-backed event technogy services provider PSAV, whose US$184.6m IPO was postponed in June after a full roadshow and just ahead of pricing, filed an amendment late Friday, pointing to another attempt at going public this year.
The latest filing has the same terms on the cover as the postponed deal, though the terms may change closer to launch.
Likewise, Advanced Disposal Services, a waste collector, re-emerged with an amended filing earlier this month after postponing its well-advanced IPO plans earlier this year.