The bigger question, though, was whether UBER's IPO would cast a shadow on the IPO market for a longer period of time. This morning's solid pricings, though representing only a small sample size, offer some encouraging evidence that the IPO market may recover sooner than anticipated.
The headliner IPO today is Avantor (AVTR), a provider of mission critical products and services to the biopharmaceutical, healthcare, education, and advanced technologies industries. Last night, the company updated the terms of its IPO, increasing the number of shares to 205 mln from 154 mln but lowering the expected price range to $14-$15 from $18-$21.
Ultimately, the company sold 207 mln shares at $14, generating $2.89 bln in total gross proceeds. Originally, AVTR was expecting to raise $3.0 bln in proceeds, so the change in terms was almost a wash in terms of capital.
The two other deals to price this morning were Fastly (FSLY) and Luckin Coffee (LK), and, impressively, both priced at the high end of their expected ranges.
FSLY, an edge cloud platform developer, priced its 11.25 mln IPO at $16 vs. the $14-$16 projected range, raising $180 mln in gross proceeds. LK, which is China's second largest coffee chain, priced its up-sized 33.0 mln ADS IPO at $17 vs. the $15-$17 expected range.
The solid demand for these IPOs was supported by the rebound in the broader markets this week, as well as by a nice recovery in UBER. In fact, yesterday, shares of UBER rallied past the stock’s opening price of $42, putting IPO investors back above water. This rally may have made some institutional investors more comfortable and amenable to putting some capital into higher risk IPOs.
Looking ahead, four IPOs are slated to price next week. Today's reassuring pricings put next week's deals on better footing for the moment, but volatility and headline risk remain, and conditions are changing rapidly.
Avantor (AVTR) -- Lead underwriters were Goldman Sachs, JP Morgan, BofA Merrill Lynch, Barclays, and Jefferies.
AVTR provides mission critical products and services to customers in the biopharma, healthcare, education and government, and advanced technologies and applied materials industries. Its products include materials and consumables, equipment and instrumentation, and services and specialty procurement that are used by customers on a recurring basis because they are frequently specified into research, development, and production processes.
In aggregate, it provides approximately six million products, including products it makes as well as products from approximately 4,000 core suppliers across the globe. The company has approximately 150 sales and distribution centers strategically located to promote supply chain efficiency, enabling it to deliver orders virtually anywhere in the world, often within 24 to 48 hours.
In FY18, its revenue surged by 370% to $5.864 bln. The growth was largely driven by its November 21, 2017 acquisition of VWR, a manufacturer and distributor of laboratory and production products and servics. Gross margin decreased by 370 bps to 31.0%, also caused by the VWR acquisition.
Due to the substantial increase in revenue, its operating income swung to a positive $413.5 mln from a loss of ($210.4) mln in FY17.
Fastly (FSLY) -- Lead underwriters were BofA Merrill Lynch, Credit Suisse, and Citigroup.
FSLY has created an edge cloud platform that helps developers deliver computing power and speed to the edge of their network. Edge computing is being seen as the next evolution of the cloud. The idea of the edge cloud is to move compute power and logic as close to the end-user as possible in order to speed up download time for webpages and video.
FSLY's platform provides developers with real-time visibility and control through which those developers can write and deploy code to push application logic to the edge. Fastly provides developers with a programmable edge cloud platform to adopt as their own. The increasing popularity of mobile apps, gaming, and live-streaming has fueled explosive growth in dynamic content. These technologies require companies, seeking to satisfy customers, to rapidly process vast amounts of data closer to the end-user or device for instant, accurate responses.
Turning to the financials, the company is not yet profitable, but it's growing the top line rapidly. Revenue in 2018 rose 38% to $144.6 mln. Fastly has also provided 1Q19 results, which showed that revenue rose 40% yr/yr to $45.6 mln.
Luckin Coffee (LK) -- Lead underwriters were Credit Suisse, Morgan Stanley, and CICC.
LK is China's second largest coffee chain in terms of number of stores. Luckin says that it has pioneered a technology-driven new retail model to provide high-quality coffee at an affordable price to the mass market.
While operating three types of stores, LK strategically focuses on pick-up stores, which account for 91% of its total stores. Its pick-up stores have limited seating and are typically located in areas with high demand for coffee, such as office buildings, commercial areas, and university campuses. This enables Luckin to stay close to its target customers and expand rapidly with low rental and decoration costs.
The company says that it has been able to cultivate a large and loyal customer base. Within 18 months, Luckin expanded from a single trial store in Beijing to 2,370 stores in 28 cities in China as of March 31, 2019. Luckin notes that its customer repurchase rate in 2018 was over 54%.
LK is not yet profitable, but it reported 2018 revenue of US$125.3 mln. For 1Q19, LK reported revenue of US$71.3 mln. It had very little sales in the prior year period as the company has grown very quickly in a short period of time since its launch 18 months ago.