Proskauer IPO Database
2016: Seven IPOs (10% of 2016)
2015: 12 IPOs (13% of 2015)
2014: 13 IPOs (11% of 2014)
2013: 14 IPOs (14% of 2013)
Total: 46 Consumer IPOs
IPOs in the consumer/retail sector were geographically diverse, headquartered in seven states, and represented a cross section of industries, including two of each in food and beverage, consumer products, leisure & recreation and one in retail.
Pricing and Performance Fall Back In line – In 2015, 58% of consumer/retail IPOs priced above the range and performed significantly better than other sectors. However, in 2016 only 14% of consumer/retail IPOs priced above the range. In 2016, performance of consumer/retail IPOs was relatively muted and trailed all other sectors at days 90 and 180 and all but one sector at day 30.
Continued Disclosures of Material Weaknesses – For a second year in a row, at least half of consumer/retail issuers disclosed a material weakness. In 2016, 57% of consumer/retail issuers disclosed a material weakness compared to 35% for all other issuers. One consumer/retail issuer in our study included financial statements that had been restated. These accounting disclosures do not appear to have impacted pricing.
Significant Disclosure of Adjusted EBITDA – Adjusted EBITDA continues to be a significant metric for consumer/retail IPO issuers. In 2016, all consumer/retail IPOs disclosed Adjusted EBITDA, compared to 42% for all other IPO issuers. This was also an area of significant focus for the SEC in the review process, as all consumer/retail issuers received a comment relating to their use of Non-GAAP measures. Typical addbacks to Adjusted EBITDA included compensation expenses, costs associated with new store openings, IPO-related expenses, legal settlements, management fees, noncash items and restructuring costs.
Shorter Time to Pricing – On average, it took consumer/retail IPOs 184 days from first submission/filing to the pricing of an IPO. This was the second shortest time period among the sectors studied in 2016, trailing only financial services. The average for all other sectors was 225 days. This quick timing comes in spite of receiving more comments on average than issuers in other sectors. It may be worth noting that while most other sectors showed a significant increase in the time from first submission/filing to pricing year-over-year, the average time increased for consumer/retails issuers by only two days from 182 days in 2015.
Pre-IPO Income Generators – All of the consumer/retail IPOs we analyzed in 2016 had net income, as compared with 63% for all other issuers having a net loss in our overall study. This is similar to what we found in last year’s study where only one (8%) of the 2015 consumer/retail IPOs we analyzed had a net loss. Unlike companies in the health care and TMT sectors, which often are valued on future earning potential, consumer/retail issuers typically have track records of generating income.
Segment Comments – 57% of consumer/retail issuers received a comment from the SEC relating to segments, as compared to 20% for all other IPO issuers. Consumer/retail issuers may be more likely to receive a segment comment due to the fact that they often have different product lines that give rise to the issue of whether the product lines constitute separate reportable segments.