The U.S. initial public offering market is bracing for another busy week, with 14 deals on tap, unless fears of contagion from a possible default by Chinese property giant Evergrande lead issuers to postpone plans.
Chinese markets have been selling off amid fears Evergrande will not meet pending interest payments on its debt, which totals more than $300 billion. Those fears have added to concerns about the Chinese government’s crackdown on some of its own tech giants that have sent U.S.-listed shares of Chinese companies lower, too.
Some 33 Chinese companies completed IPOs in the U.S. earlier this year and are now down an aggregate 27%, said Kathleen Smith, principal at Renaissance Capital, a provider of institutional research and IPO-linked exchange-traded funds.
“The rest of the U.S. IPO market seems to be holding up very well,” Smith told MarketWatch. “Year to date, 52% of all IPOs are above their IPO price and the average return is 13%, [or] 18% excluding China. For example, 10 of the 11 IPOs priced in September are above their IPO price, and they had posted a 55% return, on average.”
The market was especially strong last week, when 11 deals came to market and averaged a more than 55% return from the offer price, and none finished below their offer price. Top performers included inflammatory-disease biotech Dice Therapeutics (NAS:DICE) , coffee retailer Dutch Bros Inc. (NYS:BROS) and enterprise software company ForgeRock Inc. (NYS:FORG) .
The IPO market has already raised more money this year than in any year since 2000 and the dot-com boom, with 294 companies raising $100.5 billion so far, said Smith.
“This week, 14 IPOs are scheduled to raise $5.5 billion, [and] most are software, payments and healthcare IPOs — these have been strong-returning sectors,” she said.
The biggest deal of the week is expected to come from Freshworks (NAS:FRSH) , a California-based customer-support software company that is seeking to raise up to $969 million by offering 28.5 million shares priced at $32 to $34 each for a valuation of $9.57 billion. The company raised its proposed price range Monday from an earlier $28-to-$32 range. Morgan Stanley and JPMorgan are the lead underwriters.
Restaurant payment processor Toast Inc. (NYS:TOST) is seeking to offer 21.7 million shares priced at $34 to $36 each, and it also increased its price range Monday from a previous $30 to $33. It would raise up to $781 million at the high end of the range at a valuation of up to $18 billion. Goldman Sachs and Morgan Stanley are lead underwriters.
Also in the payments space, global money-transfer company Remitly Global (NAS:RELY) is aiming to raise up to $294 million as it is offering 7 million shares in the IPO, which is expected to price at between $38 and $42 a share. Selling shareholders are offering an additional 5.16 million shares to raise up to $216.8 million.
The Seattle-based company expects to have about 161.42 million shares outstanding after the IPO, for a valuation of up to $6.78 billion. The stock is expected to list on the Nasdaq under the ticker symbol “RELY.” Goldman Sachs and JPMorgan are the lead underwriters.
Other deals include Sovos Brands (NAS:SOVO) , whose labels include Rao’s sauce and Noosa yogurt. The company is offering 23.33 million shares priced at $14 to $16 per share. With about 97.39 million shares outstanding after the IPO, the expected pricing could value Sovos at up to $1.56 billion. The stock is set to list on the Nasdaq under the ticker symbol “SOVO.” JPMorgan, Goldman Sachs, BofA Securities and Credit Suisse are the lead underwriters.
Also in the consumer space is Brilliant Earth Group (NAS:BRLT) , a digital-first jewelry company that’s aiming to raise up to $266.7 million at a valuation of $1.51 billion. The stock is expected to list on the Nasdaq under the ticker symbol “BRLT.” JPMorgan, Credit Suisse, Jefferies and Cowen are the lead underwriters.
Online fashions company a.k.a. Brands (NYS:AKA) is seeking to raise up to $263.9 million at a valuation of $2.46 billion. The California-based company with a focus on Millennial and Gen Z consumers is expected to list on the NYSE under the ticker symbol “AKA.” BofA Securities, Credit Suisse and Jefferies are the lead underwriters.
The Renaissance IPO ETF (PSE:IPO) has gained 4.3% to date in 2021 and is up 35% in the last 12 months. The S&P 500 (S&P:SPX) has gained 15.4% in the year to date and is up 31% in the last 12 months.