CloudFlare (NET) and 10x Genomics (TXG) headline busy week for US IPOs

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Updated: 10 September 2019
  • Six new deals expected to raise around $2.2bn before week’s end
  • SmileDirectClub, CloudFlare and 10x Genomics target valuations over $3.5bn
  • Satsuma, SpringWorks and Alerus Financial also ready to go public

The US IPO market is expected to heat up this week after August’s month-long break with six new deals featuring tech startups and loss-makers including SmileDirectClub (SDC) and CloudFlare (NET) forecast to raise around $2.2bn in proceeds.

SmileDirectClub announced its intention to go public last Tuesday (3rd September) and its offering is expected to be the largest this week with proceeds of around $1.2bn contributing to a new market cap closing in on $8bn.

As detailed in the filing seven days ago, the teledentistry enterprise which develops and sells affordable teeth-straightening systems wants to use the funds to pay bonuses and create a dividend for pre-IPO investors.

JP Morgan and Citi will be the leading bookrunners for the floatation which will see 58.5m shares go on sale before the end of the week for between $19-$22.

SmileDirect is one of three companies targeting IPO valuations in excess of $3.5bn along with CloudFlare and 10x Genomics (TXG).

CloudFlare wants to raise $385m by selling 35m shares at $10-$12 in a deal run by Goldman Sachs and Morgan Stanley.

The San-Francisco-based company, founded a decade ago, has delivered sales worth $235m during the last 12 months and its web optimisation and security platforms continues to reach more internet properties around the world.

CloudFlare, planning to list with the NYSE:NET ticker, is enjoying sustainable growth with high gross margins but it does face several risks in overall losses, increasing competition and a recent pivot to enterprise customers.

Analysts say a return at the midpoint of the $10-$12 range will lead to a $3.5bn market value and they expect that to come to fruition as software IPOs have generally been strong on the opening day of trading in 2019.

10x Genomics is another company with an impressive recent growth record going public this week

The designer and manufacturer of gene sequencing tech posted revenue of $145m in 2018 and saw 85% growth during the first half of this year.

10x Genomics has already gained traction in the biomedical industry and is expecting to raise $297m to extend its market cap to $3.535bn following the sale of 9m shares at $31-$35 with JP Morgan and Goldman Sachs as top book runners.

SpringWorks Therapeutics (SWTX) and Satsuma Pharmaceuticals (STSA) have their sights set on smaller but no-less-important returns from their IPOs this week.

Springworks, a company specialising in therapies for rare forms of cancer, recently sets its price range at $16-$18 for 7.35m shares which will result in around $125m being raised and a market cap of $725m.

Satsuma, in a deal run by Credit Suisse and Leerink among others, will put 5m shares on sale at $14-16 with $75m in proceeds targeted and a $262m market cap.