2018 has seen strong activity in the U.S initial public offering (IPO) market, with the most active second and third quarters since 2014. The third quarter saw the launch of 60 IPOs, which raised around $13.4 billion thanks to bigger IPO prices than the third quarter of 2017. When looking at recent IPO activity, 2014 was undoubtedly the most robust, as 275 IPOs were launched that year. 2015 lagged behind with 170 IPOs, while 2016 saw a meager 106 companies make an IPO. IPOs enjoyed a noteworthy rebound in 2017, with around 170 IPOs, and that figure will rise again this year, in which there have already been 173 IPOs (through the end of September).
Those 173 IPOs generated proceeds of around $45.7 billion, which is 45.5% more than the amount generated in the corresponding period of last year. The third quarter’s IPO returns of 35% were also impressive, trouncing the S&P 500’s return of 7%. One of the sectors that had a crucial impact on this impressive performance was the pharma and life sciences sector, which had a stellar average return of 61%. The next most profitable sectors were the energy, utilities and mining sectors, the latter of which had only one IPO during the quarter, but one that delivered a return of 26%. Out of so many prominent IPOs, we are going to take a look at the five which have attracted the most attention from hedge funds in our database so far.
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We track more than 700 hedge funds and other institutional investors in our database and analyze their quarterly 13F filings to identify the stocks that they are collectively bullish on. Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 121% vs. a cumulative gain of 66.6% for the S&P 500 ETF (SPY) (see the details here).
Now, we are going to take a closer look at some of the biggest IPOs that the hedge funds which we track are bullish on.
5. DocuSign (DOCU)
We start with a very interesting company, one which says that the time for digital signatures has come. DocuSign (DOCU) offers electronic signature technology and digital transaction management services, making electronic exchanges of signed documents possible and secure through user identity verification and other features. The company was founded in Seattle and most of its operations are run there, though its headquarters are in San Francisco.
In its second quarterly report since it went public in April, DocuSign disclosed quarterly revenue of $167 million, which was up by 33% year-over-year. Analysts predicted that it would deliver earnings of $0.01 per share during the quarter, but the company managed to earn $0.03 per share. That great performance was courtesy of subscription revenue that grew by 35% year-over-year. At the end of the second quarter, 20 hedge funds in Insider Monkey’s database were long this stock, collectively holding 5.80% of the company’s outstanding shares.
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4. BrightView Holdings Inc (BV)
BrightView Holdings Inc (BV) is a company that offers commercial landscaping services through two divisions – Development Services and Maintenance Services. The former provides various development services such as landscape architecture, project design, and redesign to various facilities. The latter offers a number of recurring commercial landscaping services such as gardening, water management, mowing, and snow removal. This is a company with a long tradition, as it was founded back in 1939 in Plymouth Meeting, Pennsylvania, where its headquarters still reside.
It went public in June, offering around 21.3 million shares at a price of $22 per share, raising net proceeds of about $435.1 million. BrightView Holdings Inc (BV) disclosed revenue of $630.3 million for its fiscal third quarter, up by 0.4% from the comparable period of its previous fiscal year. The company attracted the attention of 21 of the smart money managers from our database during the second quarter, who collectively owned 6.40% of the company’s outstanding shares at the end of June.
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3. Pivotal Software (PVTL)
Pivotal Software (PVTL) is the provider of a cloud-based software development platform that operates through two divisions: Pivotal Labs, which provides consulting services, and Pivotal Cloud Foundry, which provides cloud-related services. The company is based in San Francisco and Palo Alto, California, and has a few other offices as well.
It started trading at $15 per share, which was the middle of its suggested IPO price range, raising $555 million. At the end of its first trading day, shares rose to $15.73. In its first quarterly financial report since it went public, Pivotal Software (PVTL) reported a 28% increase in revenue, alongside a net loss of $32.5 million, or $0.32 per share, on revenue of $155.7 million. As of the end of June, 21 hedge funds reported holding long positions in the company, collectively owning 4.10% of Pivotal Software’s outstanding shares.
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2. GreenSky (GSKY)
GreenSky (GSKY) is an Atlanta-based financial technology company founded back in 2006. The company developed a simpler solution for merchants and banks to grant home renovation loans for consumers. Thanks to Greensky (GSKY), such loans can now be attained through a smartphone app. It is one of the most valuable fintech companies in the U.S.
The company went public in May and raised $874 million. For its fiscal second quarter ended June 30, GreenSky (GSKY) reported revenue of $105.7 million, up by 28.3% from the second quarter of 2017. At the end of June, 25 smart money investors from Insider Monkey’s database were long the stock, collectively holding 3.40% of the company’s outstanding shares.
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1. Dropbox (DBX)
Dropbox (DBX) is a company that offers file hosting services such as personal cloud, cloud storage, and file synchronization, to name a few. The company was founded back in 2007, and its headquarters are in San Francisco, California.
Dropbox went public at the end of March and its shares were up by almost 36% on its first day of trading. Because of this fantastic performance, Dropbox is considered the biggest tech IPO since Snapchat’s March 2017 debut.
Dropbox reported fiscal second quarter revenue of $339.1 million, which was up by 27% from the same period last year, and beating analysts’ predictions of $330.9 million. It also disclosed earnings per share of $0.11. At the end of the second quarter, 27 hedge funds in our database were long Dropbox (DBX), collectively owning around 2% of the company’s outstanding shares.
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