By Philip van Doorn, MarketWatch
Bloomberg News/Landov
The market for initial public offerings by companies funded by venture-capital firms is red hot, and the high valuations for some offerings have alarmed even some normally bullish tech investors, as reported by David Weidner.
Thomson Reuters said Wednesday there were 23 venture-backed IPOs in the third quarter, the sixth straight quarter of 20 or more offerings.
Six years into a bull market, many investors feel “left out” if they are unable to jump into a newly listed firm’s shares right out of the gate. The highest-profile IPO this year was pulled off in style by Alibaba Group Holding Ltd. /zigman2/quotes/201948298/composite BABA +3.33% on Sept. 19, with the shares opening at $92.70, 36% above the IPO price of $68. Alibaba’s shares closed at $86.10 Wednesday, so shareholders who got in early are sitting on a big gain, while those who went in after trading started in New York may have a different story to tell.
Before getting caught up in the excitement of an IPO, you need to be very careful when considering your objective. Have you read the company’s offering filings? Do you believe in its products, services and plans for expansion? Are you expecting to make a killing by selling your shares on the first day, or do you expect to be a longer-term shareholder?
For some industries, such as biotechnology, it is common for IPOs to take place years before a company expects to generate meaningful revenue, let alone profits. All may be riding on the success of research and clinical trials that is a long way from completion.
Some investors who felt “burned” by Facebook’s May 18, 2012, IPO, when the stock sank 16% during the first week of trading, may have bought the shares because they enjoyed using the social-networking site, having done no other research. Or maybe they took part because their broker suggested they would make an easy gain.
Facebook investors who didn’t panic have seen the stock double from the IPO price of $38 (through Wednesday’s close at $76.55). That’s an excellent return for a commitment of about 2 1/2 years.
Getting back to the Thomson Reuters report, the company provided us with its entire list of third-quarter venture-backed IPOs. Here they are, sorted with the best-performing stocks up top:
Third-quarter venture-backed IPOs
| Company | Ticker | Location | Industry | IPO date | IPO price | Closing price - Oct. 1 | Gain or loss |
| Mobileye N.V. | /zigman2/quotes/239789078/composite MBLY | Amsterdam | Auto Parts: OEM | 7/31 | $25 | $53.00 | 112% |
| Avalanche Biotechnologies Inc. | Menlo Park, Calif. | Biotechnology | 7/30 | $17 | $32.27 | 90% | |
| CyberArk Software Ltd. | /zigman2/quotes/206810080/composite CYBR | Petah Tikva, Israel | Technology Services | 9/23 | $16 | $29.62 | 85% |
| Sage Therapeutics Inc. | /zigman2/quotes/200179567/composite SAGE | Cambridge, Mass. | Pharmaceuticals | 7/17 | $18 | $31.60 | 76% |
| TubeMogul Inc. | Emeryville, Calif. | Internet Software/ Services | 7/17 | $7 | $11.07 | 58% | |
| T2 Biosystems Inc. | /zigman2/quotes/206664517/composite TTOO | Lexington, Mass. | Biotechnology | 8/6 | $11 | $17.36 | 58% |
| Immune Design Corp. | Seattle | Biotechnology | 7/23 | $12 | $18.11 | 51% | |
| Otonomy Inc. | /zigman2/quotes/202407709/composite OTIC | San Diego | Biotechnology | 8/12 | $16 | $22.38 | 40% |
| Intersect ENT Inc. | Menlo Park, Calif. | Pharmaceuticals | 7/23 | $11 | $15.19 | 38% | |
| Pfenex Inc. | San Diego | Biotechnology | 7/23 | $6 | $7.30 | 22% | |
| iDreamSky Technology Ltd. Sponsored ADR | Shenzhen, China | Internet Software/ Services | 8/6 | $15 | $16.34 | 9% | |
| Ocular Therapeutix Inc. | /zigman2/quotes/207607068/composite OCUL | Bedford, Mass. | Pharmaceuticals | 7/24 | $13 | $13.97 | 7% |
| Tokai Pharmaceuticals Inc. | Cambridge, Mass. | Biotechnology | 9/16 | $15 | $15 | 0% | |
| Auris Medical Holding Inc. | Zug, Switzerland | Biotechnology | 8/5 | $6 | $5.75 | -4% | |
| Loxo Oncology Inc. | Stamford, Conn. | Biotechnology | 7/31 | $13 | $12.42 | -4% | |
| Roka Bioscience Inc. | Warren, N.J. | Medical Specialties | 7/16 | $12 | $10.53 | -12% | |
| Vitae Pharmaceuticals Inc. | Fort Washington, Pa. | Biotechnology | 9/24 | $8 | $6.92 | -14% | |
| Affirmed Therapeutics BV | /zigman2/quotes/205965917/composite AFMD | Heidelberg, Germany | Biotechnology | 9/12 | $7 | $6.01 | -14% |
| Trupanion Inc. | /zigman2/quotes/201408325/composite TRUP | Seattle | Specialty Insurance | 7/17 | $10 | $8.10 | -19% |
| GlobeImmune Inc. | /zigman2/quotes/203831596/composite GBIM | Louisville, Colo. | Pharmaceuticals | 7/1 | $10 | $7.89 | -21% |
| Marinus Pharmaceuticals Inc. | /zigman2/quotes/208112000/composite MRNS | New Haven, Conn. | Pharmaceuticals | 7/31 | $8 | $5.84 | -27% |
| Macrocure Ltd. | Petah Tikva, Israel | Biotechnology | 7/30 | $10 | $7.25 | -28% | |
| CareDx Inc. | /zigman2/quotes/200138382/composite CDNA | Brisbane, Calif. | Biotechnology | 7/16 | $10 | $7.03 | -30% |
| Sources: Thomson Reuters, FactSet | |||||||
Ten of the 23 venture-backed IPOs during the third quarter have resulted in losing positions for investors — that’s nearly half. Of course, some investors who have made long-term commitments will not be concerned by this, but it is not a comforting statistic.
Look back to the beginning of 2014, there were a total of 88 venture-backed IPOs through the third quarter, according to Thomson Reuters, and the numbers are even worse, with 41, or 47%, of them turning out to be losers so far.
But let’s accentuate the positive. Here are the 10 venture-backed IPOs through the first three quarters of 2014 showing the best gains through Wednesday:
2014 venture-backed IPOs — winners
| Company | Ticker | Location | Industry | IPO date | IPO price | Closing price - Oct. 1 | Gain or loss |
| GoPro Inc. Class A | /zigman2/quotes/209165587/composite GPRO | San Mateo, Calif. | Electronics/ Appliances | 6/25 | $24 | $91.80 | 283% |
| Ultragenix Pharmaceutical Inc. | /zigman2/quotes/204970392/composite RARE | Novato, Calif. | Biotechnology | 1/30 | $21 | $54.93 | 162% |
| Zendesk Inc. | San Francisco | Technology Services | 5/14 | $9 | $21.55 | 139% | |
| Radius Health, Inc. | Cambridge, Mass. | Biotechnology | 6/5 | $8 | $19.14 | 139% | |
| Auspex Pharmaceuticals Inc. | La Jolla, Calif. | Biotechnology | 2/4 | $12 | $25.85 | 115% | |
| ZS Pharma Inc. | Coppell, Texas | Pharmaceuticals | 6/17 | $18 | $38.20 | 112% | |
| Mobileye N.V. | MBLY | Amsterdam | Auto Parts: OEM | 7/31 | $25 | $53.00 | 112% |
| Avalanche Biotechnologies Inc. | AAVL | Menlo Park, Calif. | Biotechnology | 7/30 | $17 | $32.27 | 90% |
| CyberArk Software Ltd. | CYBR | Petach Tikva, Israel | Technology Services | 9/23 | $16 | $29.62 | 85% |
| Tuniu Corp. Sponsored ADR Class A | /zigman2/quotes/210556037/composite TOUR | Nanjing, China | Consumer Services | 5/8 | $9 | $16.51 | 83% |
| Sources: Thomson Reuters, FactSet | |||||||
And here are the 10 venture-backed IPO through the first three quarters of 2014 showing the worst declines through Wednesday.
2014 venture-backed IPOs — losers
| Company | Ticker | Location | Industry | IPO date | IPO price | Closing price - Oct. 1 | Gain or loss |
| Semler Scientific Inc. | /zigman2/quotes/201267132/composite SMLR | Portland, Ore. | Medical Specialties | 2/20 | $7 | $2.57 | -63% |
| NephroGenex Inc. | Durham, N.C. | Biotechnology | 2/11 | $12 | $4.49 | -63% | |
| Recro Pharma Inc. | Malvern, Pa. | Biotechnology | 3/6 | $8 | $3.11 | -61% | |
| Egalet Corp. | Wayne, Pa. | Pharmaceuticals | 2/5 | $12 | $5.53 | -54% | |
| Care.com Inc. | Waltham, Mass. | Consumer Services | 1/23 | $17 | $7.96 | -53% | |
| A10 Networks Inc. | /zigman2/quotes/206808991/composite ATEN | San Jose, Calif. | Technology Services | 3/21 | $15 | $8.66 | -42% |
| Aquinox Pharmaceuticals Inc. | Vancouver, Canada | Biotechnology | 3/6 | $11 | $6.60 | -40% | |
| Cerulean Pharma Inc. | Cambridge, Mass. | Biotechnology | 4/10 | $7 | $4.52 | -35% | |
| Achogen Inc. | South San Francisco, Calif. | Pharmaceuticals | 3/11 | $12 | $8.23 | -31% | |
| CareDx Inc. | CDNA | Brisbane, Calif. | Biotechnology | 7/16 | $10 | $7.03 | -30% |
| Sources: Thomson Reuters, FactSet | |||||||
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