Fenwick's IPO Report Shows Market Maintaining Moderate Pace in First Half 2017

Mountain View, CA (July 26, 2017) – The market for technology and life sciences IPOs in the first half of 2017 continued at the moderate pace set in the second half of 2016 while technology deal sizes trended larger in this latest period. These and other findings are noted in Fenwick & West’s latest IPO report released today.

The report, Key Metrics for Recent Technology and Life Sciences Initial Public Offerings, analyzed 27 technology and life sciences IPOs completed in 1H 2017. It is authored by Fenwick partners Jeffrey Vetter and Daniel Winnike.

Twenty-seven total IPO offerings (12 tech, 15 life sciences) were completed in 1H 2017, compared to 31 (14 tech, 17 life sciences) in 2H 2016 and 20 (4 tech, 16 life sciences) in 1H 2016. The largest IPO in 1H 2017 was Snap’s $3.4 billion offering, while the largest life sciences deal was Biohaven Pharmaceutical with $168 million.

“Life sciences and technology IPOs continued the improvement that started post-Labor Day 2016, but activity levels remained at a moderate pace,” Winnike said. “The 27 total IPOs in the 1H 2017 marks a slight decrease from 2H 2016. Of the 27 IPOs, California produced 30% of that total. It remains to be seen whether we’ll see a significant increase in IPO activity in the last six months of 2017.”

“We’re continuing to see significant differences between life sciences and technology IPOs. Life sciences IPOs are still outnumbering technology IPOs, but the deal sizes are generally smaller, the pricing more predictable, and there is more insider participation,” Vetter said. “Interestingly, there was a slight trend to larger technology deal sizes in the first half of 2017 compared to the last six months of 2016.”

Insights found in the Fenwick IPO survey for 1H 2017 include:

Dual-Class Voting Structures Popular with U.S. Tech IPOs
Of the 10 domestic technology companies completing offerings in the first half of 2017, six adopted dual-class voting structures with low-vote shares being sold to IPO investors. By contrast, none of the life sciences companies completing offerings in the 2017 period adopted dual-class structures.

Most Tech IPO Deals Exceed $100 Million and Trend Larger than 2H 2016; Significantly Larger than Life Sciences IPOs
Once again, technology deals were larger than their life sciences counterparts, with 75% of technology transactions exceeding $100 million. Only 20% of the year-to-date life sciences transactions exceeded $100 million.

Technology deals in 1H 2017 were also larger than in 2H 2016 – 55% of the IPOs had gross proceeds over $175 million, compared to 21% in 2H 2016.

Although life sciences offerings were smaller than technology offerings, the size of life sciences offerings increased compared to recent periods. In the first half of 2017, 73% of life sciences transactions produced gross proceeds of $75 million or more, compared to 51%, 43% and 58% in 2016, 2015 and 2014, respectively. No life sciences IPOs produced less than $50 million in proceeds in the 2017 period, compared with 16%-18% of such life sciences IPOs in 2016, 2015 and 2014, respectively.

Life Sciences IPOs Experience More Predictable Pricing
Life sciences IPOs also appeared to experience more predictable pricing in the 2017 period, with 93% of the transactions pricing in or above their red herring price range. This compares with approximately 50%-60% of life sciences IPOs pricing in or above the range in 2016, 2015 and 2014, respectively.

In the first half of 2017, 83% of the technology IPOs priced in or above the range, which was consistent with pricing results in each of the previous three years.

Of the 12 technology IPOs in the first six months of this year, 10 concluded their first day of trading above the IPO price. Of the 15 life sciences offerings, eight traded up and three closed their first day of trading at the IPO price.

Significant Insider Participation Continues in Life Sciences IPOs
In the life sciences space, significant insider participation continued, ranging from 23% to 83% of the offering size. Ten of the 15 life sciences IPOs reported insider purchases.

In contrast, in the technology space, five IPOs had modest levels of insider participation, more in the nature of typical “directed share” programs, with insiders generally purchasing under 10% of the offering size.

Tech and Life Sciences IPOs Experiencing Similar SEC Review Periods
In recent periods, life sciences IPO filings experienced a shorter time for U.S. Securities and Exchange Commission review than technology offerings. However, for offerings completed in the first half of 2017, technology and life sciences IPOs had largely similar times from initial submission with the SEC to pricing—each had average periods of approximately 110 days.

To see the full survey results, please visit this link.

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, please visit fenwick.com.