As expected, August was fairly slow for IPOs, which happens every year during the summer holidays.
Which company lost money? It was Sundial Growers (NASDAQ:SNDL), which dropped 30% from its debut.
So what should you expect for upcoming IPOs in September? Well, as should be no surprise, there will continue to be offerings from red-hot areas like cloud software operators, and there will be some deals from traditional companies.
First: What’s an IPO, Anyway?
For many people, IPOs are kind of a mystery. After all, it does seem kind of strange for a company’s stock to zoom on the first day of trading, right?
Here’s a quick explanation of IPOs: An IPO is when a company issues its shares to the public on an exchange, such as the Nasdaq Composite or New York Stock Exchange (NYSE). Often this process results in raising a large amount of money, say over $100 million.
Getting to this point is not easy. Upcoming IPOs need to have audited books, a strong financial infrastructure and an experienced management team. There will also need to be advisors — called investment bankers or underwriters — who will provide guidance through the process. This involves putting together a disclosure document called an S-1, and having a roadshow, in which management makes presentations to investors.
Advisors will generally undervalue the shares, allowing for the pop. It’s a way to reward investors. Yet these investors are usually institutions, hedge funds, and wealthy people.
Yes, it’s kind of unfair, but the system has seen little change over the decades. Despite this, individual investors have still made lots of money from IPOs like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Facebook (NASDAQ:FB) — regardless of if they got the shares at the offering price.
Let’s take a look at the seven upcoming IPOs for the month:
Among the upcoming IPOs, SmileDirectClub might garner the most interest. This company is the pioneer of the direct-to-consumer market for teeth straightening systems. SmileDirectClub leverages innovative teledentistry technology and has a fully integrated platform.
While a orthodontist may charge $5,000 to $8,000 for a procedure, SmileDirectClub charges generally below $2,000. The company also has a financing program and reimbursement relationships with UnitedHealth Group (NYSE:UNH) and CVS Health (NYSE:CVS).
From fiscal 2017 to 2019, revenues soared nearly 200% to $423.2 million. And since 2014, the company has served over 700,000 customers.
The SmileDirectClub IPO is expected to involve the issuance of 58.5 million shares at a range of $19 to $22. The lead underwriters include JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Jefferies, UBS (NYSE:UBS) and Credit Suisse (NYSE:CS). The shares will be listed on the Nasdaq under the ticker of SDC.
Cloudflare develops technologies to deliver highly robust and secure internet connectivity. The company is trying to disrupt the traditional approaches, which rely heavily on legacy on-premise software.
From 2016 to 2018, revenues have gone from $84.8 million to $192.7 million. Keep in mind that the company counts 10% of the Fortune 1,000 as paying customers. In fact, about 18% of the top 10,000 websites use at least one product from Cloudflare.
As for the upcoming IPO, the company expects to offer 35 million shares at a range of $10 to $12 on the NYSE (the proposed ticker is NET). The lead underwriters are Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), JPM, Jefferies, Wells Fargo (NYSE:WFC) and RBC.
For upcoming IPOs, Datadog is likely to be red-hot. The company is a developer of technologies for monitoring and analytics for cloud systems. Some of the benefits include IT migration, collaboration, the acceleration of time-to-market for apps and better problem resolution.
Founded in 2010, Datadog has been highly capital-efficient. It has raised $92 million – and still has $63.6 million in the bank.
What’s more, last year revenues shot up 97% to $198.1 million. The company has about 8,800 customers, up from 5,400 on a year-over-year basis.
Datadog plans to issue 24 million shares at $19 to $22 and the lead underwriters include MS, GS, JPM, CS, Barclays (NYSE:BCS), Jefferies, and RBC. The company will list its shares on the Nasdaq under the ticker of DDOG.
Ping Identity Holding (PING)
Ping Identity builds technologies that allow for secure access to any web service or API from any device. At the core of this is sophisticated AI (Artificial Intelligence) and ML (Machine Learning) that analyzes data in real-time, whether from the cloud, hybrid cloud, or on-premise systems.
In terms of growth, the company’s revenues have jumped from $172.5 million in 2017 to $201.6 million in 2018, up about 17%. More than half of the Fortune 100 use the software.
Ping Identity IPO expects to issue 12.5 million shares at a range of $14 to $16 and the lead underwriters include GS, BAC, RBC, Citigroup (NYSE:C), BCS, CS, Deutsche Bank (NYSE:DB) and WFC. The company will list on the NYSE under the ticker of PING.
Envista Holdings (NVST)
Envista is one of the largest dental product companies, with strong positions in categories like implants, digital imaging, and orthodontics. The company owns a variety of brands like Nobel Biocare Systems, Ormco and KaVo Kerr. They have over one million dentists across 150 countries. Last year, Envista posted revenues of $2.86 billion.
A key to the success of the company is a strong focus on innovation. To this end, it spent about $172 million on R&D last year.
Regarding the upcoming IPO, Envista plans to issue 26.8 million shares at a range of $21 to $24 and the lead underwriters include JPM, GS, MS, Baird, Evercore ISI and Jefferies. The company will list on the NYSE under the symbol of NVST.
10x Genomics (TXG)
10X Genomics develops instruments, consumables, and software to help analyze biological systems at scale, such as for oncology, immunology, and neuroscience.
Last year, revenues spiked from $71.1 million to $146.3 million. The company also has an extensive intellectual property portfolio, with ownership or exclusive licenses on over 175 patents (about 470 are pending).
As for this upcoming IPO, 10X Genomic expects to offer 9 million shares at a range of $31 to $35 and the underwriters include JPM, GS, and BAC. The company will list its shares on the Nasdaq under the ticker of TXG.
SpringWorks Therapeutics (SWTX)
SpringWorks Therapeutics is a biotech company, which is focused on precision medicine to create oncology treatments. By leveraging partnerships – such as with Pfizer (NYSE:PFE) — the company has been able to get two drugs into late-stage trials. For example, Nirogacestat is an oral GSI (gamma secretase inhibitor) that is for desmoid tumors (there are no FDA approved drugs for this).
In terms of the IPO, the company expects to offer 7.4 million shares at a range of $16 to $18 and the lead underwriters include JPM, GS and Cowen. SpringWorks Therapeutics will list its shares on the Nasdaq under the ticker SWTX.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.