This week’s IPO calendar has three Chinese offerings and two bank deals among nine IPOs on tap. There’s also a mystery from last week. That was a rocky time in the Land of IPOs, but more on that in a minute. Let’s take a look at the coming week.
For the week of Nov. 6, 2017, bankers expect to raise nearly $2 billion from nine IPOs.
China Pattern
China is home to three companies that plan to raise $938.5 million in the U.S. IPO market this week. They are Four Seasons Education (Cayman) (FEDU – proposed), PPDAI Group (PPDF – proposed) and Sogou (SOGO – proposed).
Four Seasons Education (Cayman), based in Shanghai, is that city’s largest after-school math education service provider for elementary school students, according to the Frost & Sullivan Report.
PPDAI Group, based in Shanghai, is a leading online consumer finance marketplace in China. The company was ranked No.1 among China’s online consumer finance marketplaces in terms of the number of borrowers, according to iResearch.
Sogou, based in Beijing, is the second-largest search engine in China ranked by mobile queries and the fourth-largest Internet company in China based on MAU or monthly active users, as of June 2017, according to iResearch.
Money for the Middle Market
The bank IPOs are CBTX (CBTX – proposed) and Metropolitan Bank Holding (MCB – proposed). Both banks cater to small to mid-sized businesses as well as to professionals (doctors, lawyers and others) and affluent individuals in their respective markets in the Lone Star state and the Big Apple.
CBTX, based in Beaumont, Texas, is a bank holding company that operates through its wholly owned subsidiary, CommunityBank of Texas, in Houston and Beaumont. It provides commercial banking solutions to small and mid-sized businesses and professionals.
Metropolitan Bank, based in New York City, is a bank holding company that operates through its wholly owned bank subsidiary, Metropolitan Commercial Bank, by providing a range of commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals in the metropolitan New York area.
Bandwidth for Business
The prepackaged software sector is represented this week by Bandwidth (BAND – proposed), a cloud-based communications platform for enterprises in the United States. The company offers solutions that include a range of software APIs for voice and text functionality. Bandwidth believes its purpose-built IP voice network is one of the largest in the country.
(For more information about these companies and others on the IPO calendar, please check the profiles found on IPOScoop.com’s website.)
Behind the Big Flop
Now back to last week’s stormy weather in the IPO market. When lightning and thunder sweep through the IPO market, people take notice. That was what happened last week. The deal was Funko (FNKO), a company that makes and sells vinyl action figures, bobbleheads, plush toys and other items based on licensed characters such as those from Disney and “Star Wars” movies, Marvel comics or popular TV shows such as “The Walking Dead.” Funko splattered in the aftermarket. There was a reason.
Last Monday, the IPO services were giving the Funko deal an opening premium call of up 1/2 to 1 point. Then color changed to the negative side – and that was confirmed when Funko priced 10.4 million shares at $12 each to raise $125 million. That was down from its range of 13.3 million shares at $14 to $16 each to raise $199.5 million – a cut of 37.5 percent. The IPO opened at $8 and closed at $7.07, DOWN 41.1 percent from its initial public offering price. Howls of shock came from IPO investors and the financial press had all sorts of stories, but old-time IPO players knew what happened.
Major institutional investors walked away from the deal.
They heard the final pricing terms, didn’t like them, and bankers were left holding the bag. As a result, the bankers had an unknown volume of unsold shares at $12 each. The deal opened at $8 and you know the rest. The private hedge funds and the Joe Six-Packs of the world were on their own. Nobody punishes the giant financial investors when they walk. That’s Wall Street for you.
There were reports that Funko was the worst opening-day flop for an IPO in the past 17 years. It’s in the same dubious company as eChapman.com, a financial services company from yesteryear. On June 19, 2000, eChapman.com priced its IPO of 1.7 million shares at $13 each. It closed its opening day at $7.375, down 43.3 percent from its IPO price. Fast forward to June 5, 2003; the company withdrew its SEC registration. But that was nearly two decades ago.
Deeper into November
For the week of Nov. 13, 2017, the IPO calendar lists one deal expecting to raise about $111.7 million. However, when the SEC opens its filing window again on Monday morning, anything can happen.
Stay tuned.
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinion.