The third quarter for the initial public offering (IPO) market is usually lighter. The main reason is that there are few offerings during August because of summer vacations.
This was the case for the latest quarter. Yet, this does not mean the bullishness has wavered. For the most part, Wall Street still has a strong appetite for deals and this should mean a strong fourth quarter.
During the latest quarter, there were 49 IPOs and the average return was a sizzling 32.55%. Keep in mind that four deals posted gains of over 100%.
So then, what were some of the notable deals — the good and the bad? Well, let’s take a look at four:
New IPOs: Tilray (TLRY)
Before the cannabis producer Tilray (NASDAQ:TLRY) came public, I wrote the following for InvestorPlace.com: “And yes, Tilray IPO does offer an easy way for investors to play this trend. In other words, it seems like a good bet that the offering will get a bullish reception.”
Of course, this has turned out to be a major understatement. The Tilray IPOs first-day gain was 31.7% and then the shares went parabolic. The stock would go from $17 to $300. But recently, the air has come out of the bubbly valuation, with the stock price now at $140. Yet the market cap is still $13 billion.
Tilray is one of the top players in the cannabis industry and should get lots of traction from the legalization — for recreational purposes — in Canada. But the share price is probably going to see more volatility, as there is only a small number of shares available in the market and the short squeeze has probably played out already.
If anything, Tilray stock will probably look at raising more capital in the coming months, so as to take advantage of the sky-high valuation.
New IPOs: SurveyMonkey (SVMK)
SurveyMonkey’s (NASDAQ:SVMK) roots go back to the dot-com era when the company was founded by Ryan Finley in 1999. The company has gone on to raise $1.1 billion and a big part of the use of proceeds has been for acquisitions, which has resulted in a comprehensive suite of applications for polling, user feedback and market research.
The online platform has 16 million active users across the globe. As for the IPO, the company raised $180 million. Salesforce.com (NYSE:CRM) also participated in the offering by investing $40 million. The company will likely be a key strategic partner.
Yet, the growth ramp has been muted SurveyMonkey. Last year, revenues increased by 5.5% to $218.8 million. There was also a loss of $24 million. In light of this, SVMK may ultimately get overshadowed by newer, faster-growing tech companies that are likely to hit the markets.
New IPOs: Eventbrite (EB)
Eventbrite (NYSE:EB) operates a global marketplace for online ticketing for events. Last year, the company issued about 203 million tickets for roughly three million events.
Some of the key benefits of the platform include the ease-of-use, lower costs for managing events, analytics and more exposure for potential attendees. There is also a viral element to the service. That is, the marketing of events means that more and more people experience the Eventbrite brand.
Growth has certainly been robust. In 2017, revenues shot up by 51% to $202 million. However, the company is still posting net losses. There’s also something unique about the company: The co-founders are husband and wife. Although, the wife, Julia Hartz, has taken the reins as CEO. The couple has also been successful with early-stage investments, such as in Airbnb, Uber and Pinterest.
New IPOs: Constellation Pharmaceuticals (CNST)
The Constellation Pharmaceuticals (NASDAQ:CNST) IPO got off to a rough start. On its first day of trading, the shares plunged by 23.3%. But this was not the end of the bad news. Note that CNST stock would eventually fall by a grueling 48.3%. This actually puts the IPO as the worst for the third quarter.
Why the poor performance? When it comes to early-stage biotech companies — which raise relatively small amounts — it is tough to get much attention from investors. There may also be concerns of dilution, as the company will likely need to go to the capital markets again.
But then again, CNST does have some promising therapeutics in its pipeline. For the most part, the company uses epigenetics to find ways to fight cancer, especially those forms that involve abnormal gene expression or drug resistance.
One of the treatments, which is in a Phase 1b/2 trial, is focused on metastatic castration-resistant prostate cancer and another is in Phase 2 for myelofibrosis. However, in terms of efficacy, there will likely not be any notable findings until the middle of next year.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
