INTENDSûTOûlLEûANûINVESTIGATIONALûNEWûDRUGû
application and initiate a Phase I trial in
human patients by the end of next year.
BIOTECHS CALL ON SPECIALIST
SUPPORT
Life sciences IPOs were forced to rely on a
handful of investors after market conditions
turned hostile toward new issues.
OSMOTICA PHARMACEUTICALS managed to
cobble together enough demand to sell
6.65m shares at US$7 each, resulting in
gross proceeds of US$46.5m.
Jefferies, Barclays, RBC Capital Markets and
Wells Fargo had cut the offering price to US$7
FROMû53
ûATûLAUNCHûINûAûNEWûlLINGûONû
Monday.
Majority owners Avista Capital Partners
and Altchem kicked in another US$14m
through a concurrent private placement.
Osmotica closed its debut session on
Thursday at US$8.15, a seemingly
respectable 16.4% gain on offer. Yet only
700,000 shares traded hands, or US$5.8m
worth of stock, suggesting the deal drew
only a very small group of investors.
“The good news is a company gets public.
4HEûBADûNEWSûISûTHEûLIQUIDITYûPROlLEûISûNOTû
great,” said one ECM banker involved in the
underwriting. “Frankly, a lot of times you
HAVEûTOûWAITûFORûTHEûlRSTûFOLLOW
ONûFORûTHEû
LIQUIDITYûPROlLEûTOûIMPROVEû)TûONLYûTAKESûONEû
investor that needs money for the strategy
to fall apart.”
Orphan drug developer PHASEBIO
PHARMACEUTICALS was also forced to drastically
reset its IPO expectations.
The company raised US$46m in a much-
overhauled IPO that saw it sell 9.2m shares
at US$5.00, a far cry from the originally
marketed terms of 5m shares at US$12-$14.
The shares debuted and closed at US$5 on
Thursday, sticking at that level on Friday.
Citigroup, Cowen and Stifel were the joint
bookrunners.GRAF SPAC OFFERS UP JUMP-BALL
ECONOMICSGRAF INDUSTRIAL, an industrial-focused SPAC,
structured its US$225m IPO with so-called
“jump-ball” economics to help it close an
acquisition.
EarlyBirdCapital and Oppenheimer earned a
US$4.5m underwriting fee from the sale of
22.5m units at US$10.00 apiece, a 2% spread.
Once it closes an acquisition, Graf will pay
an additional 3.5% of gross proceeds raised,
or US$7.9m.
4HEûVEHICLEûISûSTRUCTUREDûWITHûAûlNDERSû
fee that would pay investment banks not
involved in the underwriting up to US$3.2m,
or 40% of that incremental fee, for help
identifying and closing an acquisition.
EarlyBird, a SPAC specialist, would split
the remaining US$4.7m, or 60%, on a
closing.
“There’s no way a big bank is going to
work for 40% economics and have the otherEQUITIES AMERICASYeti faces cooling market with US$420m IPO
US Cooler brand tries to put 2016/2017 challenges behind itAfter an aborted IPO effort that was filed in
2016 and spent two years on the shelf, premium
ice cooler brand YETI is braving fresh market
gyrations with a revived effort to go public on
the NYSE.
The Austin, Texas-based maker of “status”
coolers and drinkware for outdoors launched the
sale early Monday of 20m shares at US$19-$21
each for pricing post-close Wednesday, October
24.
Totalling US$420m but with 17.5m of the
20m shares coming from selling insiders, the
IPO represents 24% of the company’s expanded
capital.
While others that could have launched
IPOs during the week opted to wait for the
renewed market volatility to subside, Yeti is
hoping to prove just the sort of IPO for a cooling
market.
Yeti had “evolved from being a wholesale-
biased business to a true omni-channel business
with high direct-to-consumer component”, chief
executive Matt Reintjes told investors in the
company’s online roadshow presentation. “In
the last two years, we have really expanded our
brand aperture.”
The company showed its hand in September
after refiling its IPO plans confidentially with the
SEC in July this year.
In a rapid reversal of fortunes, this came just
three-and-a-half months after the deal looked
dead, since in March Yeti formally withdrew its
previous IPO filing that was first put forward in
April 2016.Bank of America Merrill Lynch, Morgan
Stanley and Jefferies are leading Yeti’s 11-firm
underwriting syndicate, similar to the team that
lined up for the aborted IPO effort that was filed
in 2016 and was kept on ice for almost two years.COMEBACK
The latest filing and Yeti’s online roadshow
offered a detailed explanation of what went
wrong in 2016 and 2017 when sales sank due to
excess inventory stuck in its wholesale channels.
Sales fell 22% to US$639.2m last year but
have again grown in recent periods.
“The market is going to want to see its growth
trajectory, particularly on the wholesale on the
side of their business, and what type of conviction
there is in that,” one banker on the deal said.
Yeti has since “implemented a series of pricing
actions”, introduced new products, expanded its
direct-to-consumer business, diversified its retail
partners, increased its “engagement” with key
retailer Dick’s Sporting Goods, and shaken up its
management.
Yeti’s hard coolers range from US$200 to
more than US$1,000 each, and observers still
fear extensive competition is a threat to its
premium market positioning.
“There are many different products out there,
essentially the same product at half the price,”
one banker away from the deal said. “But there
is no doubt they have a strong brand.”
Yeti’s competition extends from legacy cooler
brands Igloo and Coleman to new competitors
Pelican and Otterbox (which also makes iPhonecases), and also Tervis and HydroFlask in the
drinkware category.
One banker on the deal said increasing
drinkware sales had diversified the company’s
product mix and bolstered its growth.
In the first half of 2018, drinkware sales
(ramblers and tumblers that keep drinks
hot or cold) grew 49% to US$176.7m, and
now represent more than half of total sales
outstripping cooler sales in the period.
Sponsor Cortec is selling 13.3m shares of the
17.5m-share secondary component of the IPO,
cutting its stake to 51.4% from 69.4%.
Cortec invested US$67m in Yeti in 2012 and
reportedly stood to make more than US$3bn or
50 times its money in four years (on paper) from
the 2016 IPO plan. Though that did not happen,
Cortec is still making out well under the terms of
Yeti’s latest IPO attempt.
The terms attribute Yeti a market cap of up
to US$1.7bn and an enterprise value of about
US$2bn including about US$320m of net debt
post-IPO. Yeti paid a US$451.3m cash dividend
in May 2016, of which US$312.1m went to Cortec.
Yeti’s overall numbers for the first half of 2018
show 34% top-line growth and 46.2% gross
margins though sales growth eased to 7% in
the September quarter based on preliminary
numbers disclosed in its filing.
Adjusted Ebitda margins expanded to 19.6%
in the quarter, up from 16.7% a year earlier, and
its profitability means that leverage is relatively
low for a sponsor-backed deal.
Anthony Hughes