The IPO Buzz: Last Dance before Labor Day

Six companies are set to go public this week in what is typically the last IPO dance before Labor Day. Bankers expect to raise about $2.84 billion. A Chinese real estate company, KE Holdings (BEKE proposed), aims to raise about $1.9 billion – or 68 percent of the week’s total projected dollar volume.

Duck Creek Technologies (DCT proposed), an insurance software firm, is attracting attention. It’s part of an insurance IPO trend this summer, when Lemonade (LMND) and Trean Insurance Group (TIG) went public.

XPeng (XPEV proposed), a Chinese electric-vehicle maker and a Tesla rival, made its IPO plans official on Friday afternoon, Aug. 7^th, with its F-1 filing. This generated some buzz that XPeng might make its debut as soon as this week, following on the heels of the successful IPO of China’s Li Auto (LI) in late July. CNBC reported on Aug. 5^th that XPeng has raised about $400 million from investors ahead of its expected IPO in the United States. XPeng intends to list its stock on the New York Stock Exchange, its prospectus says.

The IPO market usually takes a break from mid-August through Labor Day weekend. This week’s smaller IPO Calendar could be an indication that bankers are wrapping things up before heading to their hideaways in the Hamptons for a late summer break.

An eye-popping 17 IPOs got priced last week. Meanwhile, the rush to the SEC’s filing window resembled last call at the bar on a Saturday night – at least the way we remember it in the pre-pandemic era. A total of 17 new IPO filings (S-1 or F-1 documents) checked in at the U.S. Securities and Exchange Commission last week. In addition, the SEC logged a total of 20 amended IPO filings (S-1/A or F-1/A documents) in which companies filed new terms for their IPOs.

The NASDAQ Composite Index closed above 11,000 for the first time last Thursday.  For the week, all three major U.S. stock indexes advanced, according to The Wall Street Journal: The NASDAQ and the S&P 500 each rose 2.5 percent, while the Dow Jones Industrial Average climbed 3.8 percent. A strong U.S. stock market blows friendly trade winds into the IPO market’s sails.

A Half-Dozen IPOs Ahead

Among the six IPOs expected this week, one is a SPAC (special-purpose acquisition company) and two are REITs (real estate investment trusts).  Rounding out the roster are a digital audience marketing platform, a Chinese real estate company and an insurance software company.

Let’s take a look at these IPOs, organized by pricing and trading dates.

Monday night pricing for Tuesday trading:

Kubient (KBNT proposed for the stock and KBNTW proposed for the warrants) is based in New York. The company says its team of marketing and technology veterans developed the Audience Cloud, a cloud-based software platform to trade digital programmatic advertising.

Worth noting: This is a unit offering, but the units will not trade. The IPO consists of 1.6 million units at $5 to $7 each to trade on the NASDAQ.

The “Risk Factors” section starts on page 12 and includes this line on page 13: “We have incurred losses since our inception and we may continue to incur losses. If we fail to generate significant revenue through our platform, we may never achieve or sustain profitability.”

Tuesday night pricing for Wednesday trading:

Fortress Value Acquisition Corp. II (FAII.U proposed), based in New York, is a blank check company, also known as a special-purpose acquisition company (SPAC).

This is an IPO of 30 million units at $10 each to trade on the NYSE.

From the prospectus: “Although we may pursue an acquisition in any industry or geography, we intend to capitalize on the ability of our management team and the broader Fortress platform to identify, acquire and operate a business that may provide opportunities for attractive risk-adjusted returns.”

The “Risk Factors” section begins on page 32 and includes this line, which is standard for SPAC or blank-check IPOs: “Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.”

Wednesday night pricing for Thursday trading:

KE Holdings (BEKE proposed), based in Beijing, is a SoftBank-backed real estate company that says it aspires to provide comprehensive and trusted housing services for 300 million families. Beike is China’s leading integrated online and offline platform for housing transactions and services (home sales and rentals, home renovation and other services).

This is an IPO of 106 million American Depositary Shares (ADS) at $17 to $19 each to trade on the NYSE.

The “Risk Factors” section starts on page 21 and includes this line: “Our business is susceptible to fluctuations in China’s residential real estate market and is subject to government regulations.”

NetSTREIT (NTST proposed), based in Dallas, is a real estate company (a REIT) that owns and manages single-tenant retail commercial real estate under long-term net leases with high credit quality tenants across the United States. Walmart, Home Depot and Lowe’s are among its top 10 clients.

This is an IPO of 15.8 million shares at $19 to $21 each to trade on the NYSE.

The “Risk Factors” section starts on page 28 and includes this line as part of the risks associated with owning commercial real estate:

“inability to collect rents from tenants due to financial hardship, including bankruptcy.”

Thursday night pricing for Friday trading:

Duck Creek Technologies (DCT proposed), based in Boston, is the leading SaaS provider of core systems for the property and casualty insurance industry.  Its Duck Creek Platform improves the efficiency of insurance carriers’ core processes, including policy administration, claims management and billing. Its customers include the top five North American insurance carriers. (SaaS is an acronym for Software as a Service.)

This is an IPO of 15 million shares at $19 to $21 each on the NASDAQ.

The “Risk Factors” section of the prospectus begins on page 23 and includes this line on page 24: We have a history of losses and may not achieve or maintain profitability in the future.

Pricing Week of Aug. 10^th

Presidio Property Trust (SQFT proposed), based in San Diego, California, is a diversified real estate investment trust (REIT). Its commercial portfolio consists of about 1.13 million square feet comprised of 10 office properties, one industrial property, and four retail properties in Southern California, Colorado and North Dakota.

This is an IPO of 2 million shares at $5 each to trade on the NASDAQ.

The “Risk Factors” section begins on page 18 and includes this line right up front: Our business, financial condition, results of operations and cash flows are expected to be adversely affected by the recent COVID-19 pandemic and the impact could be material to us.

Week of Aug. 17^th

No IPOs have been scheduled for the week of Aug. 17^th, when the IPO market usually slows down as bankers go on vacation for a few weeks before the Labor Day weekend. But this summer, the IPO playbook has not followed the typical pattern. More names might land on the IPO Calendar – for next week and to expand this week’s total as well – when the SEC’s filing window opens again for business on Monday morning.

Stay tuned.

Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with IPOScoop.com. The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO. The information offered is taken from sources we believe to be reliable, but we cannot guarantee the accuracy.

Disclosure: Nobody on the IPOScoop.com staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The IPOScoop.com staff does not issue advice, recommendations or opinions.