Mountain View, CA (February 8, 2018) – The subdued trend in the market for tech and life sciences IPO activity continued in the second half of 2017 despite a slight increase in the number of companies completing offerings in the second half of the year. These and other findings are noted in Fenwick & West’s latest IPO report released today.
The report, Key Metrics for Technology and Life Sciences Initial Public Offerings 2017, analyzed 65 technology and life sciences IPOs completed in 2017. It is authored by Fenwick partners Jeffrey Vetter and Daniel Winnike.
Of the 65 IPOs last year, 38 offerings (13 tech, 25 life sciences) were completed in H2 2017, compared to 27 (12 tech, 15 life sciences) in H1 2017. In 2016, just 51 tech and life sciences companies went public. Of those, 31 did so in the second half of the year and 20 in the first half.
“As anticipated, IPO market activity improved slightly in the second half of 2017 although technology companies accessing private sources of capital continued to delay their entry into public-company status for longer periods than in the past,” Winnike said. “The fact that all but one of the technology IPOs completed in the second half of 2017 was done in the fourth quarter suggests momentum in the market heading into 2018.”
The average offering proceeds in H2 2017 were $223.5 million for technology companies and $96.3 million for life sciences companies.
“In line with prior periods, the size of tech offerings was notably larger than their life sciences counterparts, but life sciences offerings closed at double the rate of tech in the second half,” Vetter said.
Insights for H2 2017 from the latest Fenwick IPO survey include:
Fueled by Life Sciences, IPO Activity Up Slightly in H2 2017
- 65 technology and life sciences IPOs were completed in 2017, compared to 51 the prior year.
- The 25 life sciences IPOs in H2 2017 represent an increase from 15 in H1 2017. This compares to an average of 23 transactions in the half-year periods beginning with 2012.
- On the other hand, the number of technology IPOs in H2 2017 was only 13, compared to 16, the average number of technology IPOs in the half-year periods beginning with 2012.
Tech IPO Valuations Higher than Life Sciences
- Consistent with prior periods, technology offerings were notably larger than their life sciences counterparts.
- The average offering proceeds in H2 2017 were $223.5 million for technology companies and $96.3 million for life sciences companies. This compares to $384 million average offering proceeds for technology companies—boosted by the $3 billion Snap IPO—and $75 million for life sciences companies in H1 2017.
Tech Continues to Embrace Dual-Class Structures
- Of the 13 technology companies completing IPOs in H2 2017, eight had adopted a dual-class structure.
- Notably, all four of the internationally based technology companies (three in China, one in Singapore) employed a dual-class structure. Life sciences companies continued to have a traditional single-class structure.
Stable Pricing Environment for H2 2017 Offerings
- 46% of technology deals priced above their red herring range and 39% priced within the range.
- 80% of life sciences deals priced in or above their red herring range.
- 2017 deals saw favorable first-day trading, with all technology offerings and 80% of the life sciences offerings closing above their IPO prices.
Insider Participation in Life Sciences
- Consistent with a prevailing trend over the past several years, insider participation was an important feature of life sciences offerings.
- Insiders purchased shares in the IPO, or in a concurrent private placement, in 21 of the 25 life sciences transactions completed in H2 2017.
Pricing Delays Common in H2 2017
- A notable proportion of deals completed in H2 2017 had been filed with the SEC many months before the offering was completed.
- Of the 38 completed offerings, 10 were for companies that made their initial confidential submission more than six months prior to the ultimate pricing.
- Two of these 10 companies made their initial public filing more than 100 days prior to pricing.
About Fenwick & West
Fenwick & West LLP provides comprehensive legal services to ground-breaking technology and life sciences companies – at every stage of their lifecycle – and the investors that partner with them. We craft innovative, cost-effective and practical solutions on issues ranging from venture capital, public offerings, joint ventures, M&A and strategic relationships, to intellectual property, litigation and dispute resolution, taxation, antitrust, and employment and labor law. For more than four decades, Fenwick has helped some of the world's most recognized companies become and remain market leaders. For more information, visit fenwick.com.