Following January’s gains, corporates began testing the US equity capital markets in early February. IPO activity was highest since September, with 11 IPOs raising $1.7bn. However, the optimism was short-lived as the market retreated following hotter than expected inflation data. That said, total issuance this month was 3x the February 2022 total, 33% higher than the TTM average level, and YTD volume is now 4.5% above this time last year.

 

Nextracker (NXT), a solar tracker company owned by publicly traded FLEX, completed a $734mm IPO, pricing shares above the $20-$23 range at $24. The deal saw strong one-day performance, with the stock trading up 26.3% on 2/9, and finished the month in line with the first-day close. This deal follows a trend in which profitable segments of larger public companies have successfully gone public, most recently seen with CRBG from AIG and MBLY from INTC. These deals are paving the way for similar anticipated IPOs including JNJ’s consumer health brand Kenvue and Atmus Filtration Technologies out of CMI.

 

Also in the renewable energy space, Enlight Renewables (ENLT) listed shares in the US for the first time; the company was previously solely listed on the Tel Aviv Stock Exchange. The deal raised $290m and shares priced at $18 per share, a 6.3% discount to the 2/9 close on the TASE and fell 1.4% day-one (2/10).

 

In Biotech, Structure Therapeutics (GPCR) priced a $185m IPO of ADR shares at the high end of the $13-$15 range. The stock rose 73.3% day one (2/3) and closed the month up 70.4%. Mineralys Therapeutics (MLYS) raised $221m and priced its IPO at the high end of the $14-$16 range. Shares rose 15.3% day one and closed the month up 11.1% total.  

 

Hesai Group (HSAI), a developer of LiDAR technology for autonomous driving, raised $190m in an IPO of ADR shares on the Nasdaq. The deal priced at the high end of the $17-$19 range and returned 10.8% day one (2/9), though closed the month 1.5% below the deal price. We will be monitoring for a potential rebound in US listings for Chinese companies like Hesai in the coming months.

 

On the Follow-On front, $9.3bn of stock was sold in 57 deals. The average discount on deals >$50m was 6.4% and stocks traded up 0.6% day one (vs 6% discount and 3.7% gain in January). Issuance was broad based with Healthcare, Technology, Consumer, and Utilities leading across sectors. The largest deal across sectors was a $1.5bn overnight FO of American Water Works Co (AWK) which priced at a 3.5% discount on 2/28.

 

Although the quality and quantity of IPOs in February was encouraging, momentum may have stalled for the moment. The macroeconomic climate remains the biggest factor preventing a broader reopening of US ECM as it remains unclear when we will see a peak in interest rates.

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