Trader Talk

Slow start to IPO biz, but may be heating up

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It's been quiet in the IPO business in 2015, but it's starting to heat up. Some 13 companies are scheduled to price this week, including four holdovers from last week. The majority are biotech related.

There's one fairly large deal scheduled to price tonight on the Nasdaq involving Inovalon. Simply put, they help healthcare companies manage costs. Seventeen of the top 25 healthcare plans use their data. They hit all the right "buttons" for IPO investors, which are big data analytics, cloud computing, healthcare. They're also profitable and growing at 20 percent a year.

They're looking to price 22.2 million shares between $24 and $26, which is a bump up from the previous range of $21 and $24. At the midpoint, that's $555 million. With a market cap of roughly $3.9 billion, that's roughly a 14-percent float.

A smaller deal also looking to price tonight is Sol-Wind Renewable Power, seeking to raise 8.7 m shares between $19 and $21. This is obviously a solar company, but it's a fairly complex financing structure: it involves taking solar assets and putting them in a vehicle to take advantage of investment tax credits.

The hook is a very high yield: 6.5 percent. There's several of these so-called "yield companies" that have gone public, including TerraForm Power, Abengoa Yield and NRG Yield.

Still, it's definitely been a slow start to the IPO business, as the number of deals so far is half what it was at this time last year, according to Renaissance Capital.

The main reason is that energy IPOs, specifically Master Limited Partnerships, have virtually disappeared. There's also a lack of any large deals of other types. Last year, for example, we already had vehicle financing firm Santander Consumer go public.

Still, IPOs have recovered since the markets began calming down at the end of January. The Renaissance Capital IPO ETF, a basket of about 60 recent IPOs, has risen roughly 6 percent this month.