IPO Winners & Losers: Defense Tech Wins, Big AI Bets, and the IPO Window

Welcome to Renaissance Capital’s IPO Winners and Losers, the weekly podcast breaking down the biggest stories shaping the IPO market.

This week:
• The IPO market looks strong on the surface — but is it running on FOMO?
• Defense and AI-linked IPOs surge while consumer names struggle
• Cerebras prepares for the largest AI IPO ever
• Three billion-dollar AI infrastructure deals test the market next week
• Lime files for an IPO years after its SPAC-era ambitions faded

We also discuss why the current IPO window feels “precarious” and what investors are rewarding right now.

If you follow IPOs, AI infrastructure, market psychology, or disruptive growth companies, this is the place to stay ahead of the next wave of public market stories.

Hit like and subscribe for weekly IPO market breakdowns, and get the newsletter in your inbox every week: https://ipoupdates.renaissancecapital.com

Transcript

SPEAKER_02 0:01

This week's winner, anything with a defense or AI angle. And this week's loser, consumer brands, and anyone without a clear why now.

SPEAKER_01 0:09

With the largest AI IPO ever on deck for next week, the stakes just got a lot higher. So let's get into this week's winners and losers.

SPEAKER_02 0:21

Now, a quick note before we dive in: this podcast is for informational purposes only, and nothing we discuss should be taken as investment advice or a recommendation to buy, sell, or hold any security. Past performance does not guarantee future results, and one cannot invest directly in an index. For the full disclosure, check the end of this recording. Now, let's walk through the week because the surface looks strong, but the details are a bit more complicated. We had seven IPOs launched last Monday off the back of the recent rally, and that lines up$3 billion offerings for next week, the most in a single week since 2021. And let me tell you, Matt, that chaotic Monday morning really took me back to 2021. So on paper, the IPO market is cranking.

SPEAKER_01 1:03

But the winners and losers newsletter frames this well. I would say precarious is the right word. The ceasefire in Iran lifted stocks, but it didn't end the war. So the macro backdrop is still kind of fragile.

SPEAKER_02 1:17

And you're seeing that tension in investor behavior. That heavily on the hot deal, bail at the first sign of cracks. It's the same kind of flipping that we saw last summer. So you're seeing these day one pops followed by pretty weak trading in the aftermarket.

SPEAKER_01 1:30

Yeah, and that means the window is open, but it's not wide open. Issuers are reading that correctly. File now, price while you can.

SPEAKER_02 1:40

And speaking of pricings, let's start with what actually priced, because the scorecard this week is pretty instructive. We had Signals Intelligence Provider, Hawkeye 360, up 31% on day one, uh, boosted in part by these really strong AI and defense budgets, which seem like they really just keep getting bigger. Um, and then we had early stage miner, rare earths Americas, which also traded up. Um, and that one was also defense adjacent uh in this kind of critical mineral space. So the theme is consistent, that's for sure.

SPEAKER_01 2:10

Yeah, these aren't random pops. Investors came in prepared to pay for defense exposure. Uh the uh geopolitical backdrop really doing the work here.

SPEAKER_02 2:19

And on the flip side, we had beverage brand brand Suja Life, which was the loser this week. Um, after some success early in the year with consumer names, it seems like that space is kind of struggling to find its footing in this market.

SPEAKER_01 2:31

Yeah, so Suja does wellness shots, like that song, wellness shots, shots, shots, shots, shots, shots, everybody. But in fact, everybody was not doing wellness shots. Suja fell 15%. The pitch here was that consumers might drink one every day as part of their daily routine. Uh, and while health and wellness is a big theme, there was a concern, I think, that this could be a fad. It would have been nice to see more traction with their slice acquisition, and it really didn't help that once upon a farm is trading below the offer price.

SPEAKER_02 3:03

I'm sure um who is it, Lil John will appreciate that shout out. Thank you.

unknown 3:07

Thank you.

SPEAKER_02 3:07

Yeah, and we had another big loser, Mobia Medical, down 22%. Um, and that is the worst debut of the year for a sizable deal. Um, that one does medical implants and it's early stage with no obvious thematic tailwind, um, no real macro story behind it. So the market just said no.

SPEAKER_01 3:24

Yep. The lesson is blunt. If you don't have a clear reason why now is your moment, investors might just find a reason to pass.

SPEAKER_02 3:32

Yeah, and CFOs are apparently getting the memo. Uh the newsletter puts it uh puts it well. Um go public while you can, because the window can slam shut pretty fast. So with last week behind us, let's start looking ahead. Because next week is actually a big moment. Uh as we said before, three billion dollar offerings on the calendar, all with this AI infrastructure angle. And that is not a coincidence. That's issuers reading where capital is flowing right now.

SPEAKER_01 4:01

Yeah, and I think uh I would point to Fervo Energy as being the unusual one. They're a next-gen geothermal AI power play. Uh no revenue yet, targeting a$7 billion market cap. Uh that would be pretty unusual, but uh I think they can point to their$7.2 billion in power purchase agreements lined up. That's a pretty sizable backlog that validates uh their technology.

SPEAKER_02 4:25

Mm-hmm. So yeah, the revenue is effectively contracted, just not recognized yet. Um and investors may accept that as a different risk profile than a pure pre-revenue story. But I did want to bring up Fermi because that was a similar one where contracts fell through and um the AI hype didn't really save it.

SPEAKER_01 4:43

I was trying to think of comparisons to Fervo. Um, a more favorable one might be X Energy, the uh small modular nuclear reactor play, uh, also somewhat early stage, but kind of tapping into that uh AI uh power demand. So we'll see if the PPAs are enough to get investors comfortable with that$7 billion valuation. Uh beyond Fervo, we've got Blackstone Digital Infrastructure Trust. It's a new REIT, newly formed uh data centers leased to hyperscalers. So here we're looking at growth plus a dividend. Uh that's a different investor base entirely, more income-oriented, not just growth.

SPEAKER_02 5:19

Yeah, that's a smart structure. Um broadens that potential buyer pool at exactly the right time when a lot of people are buying up uh these spaces, it seems.

SPEAKER_01 5:28

And last but not least, Cerebrus. So, Avery, if you don't mind, I'm just gonna run my mouth for a bit. This is worth spending some time on. Uh get up on that soapbox. Cerebrust will be the largest AI IPO of all time. They're raising more than 3 billion and a market cap of about 35 billion. I would sum it up as this is a giant IPO of giant AI chips. Now, most GPUs are the size of a postage stamp, but Cerebrus makes chips the size of a dinner plate. So, of course, in the prospectus, you see their slogan, bigger is better, but better than what? Terminal please, NVIDIA. Now half the prospectus is talking about how these chips are better, faster, more powerful, and more efficient than NVIDIA Blackwell B200. And yet, I'd say this is not a David and Goliath story, unless David and Goliath were both selling shovels during a gold rush. This is a story of sheer demand for AI compute. Ironically, though, I think that makes this uh story a little bit harder to evaluate. Here's why. Much of the valuation rests on OpenAI's$20 billion commitment over the next three years. But is that because Cerbrisk chips are so much better, or is that because OpenAI simply needs all the compute it can get? Uh if that were the case, I'd see that as you know the bear case. Uh the base case might be that uh the market views Cerbrisk chips as necessary for building the most advanced models, but maybe not for widespread use. And then obviously the bull case is that these chips are so good they replace NVIDIA as the new workhorse of AI compute. Uh what's the what differentiates Cerebrus? They really excel at inference. I was writing up on training versus inference. Up to this point, most of the AI models have put their effort into training. The bigger the model, the better. But now it looks like uh inference time scaling is the next frontier in AI compute, and that's where Cerebrus really shines. But it's not all sunshine and rainbows. Uh this company does have some hair, a little bit of uh the the story is a little messy. The company is unprofitable. So far, most of the sales have gone to a related party based in the UAE, and even that open AI deal granted the company$4 billion worth of stock in Cerebrust. So a lot of related party transactions here. Um and you know, I see the big risk is that let's say if there's a 10% pullback in AI infrastructure stocks, Cerebrus falls 20%. That's common with IPOs in general, but I think it seems especially true here. Uh but you know, for now, Cerebrus does look like a very exciting story, an exciting IPO in the AI space with a lot of potential. Now we'll get off my soapbox.

SPEAKER_02 8:15

Well, yeah, that was uh very thorough breakdown, so thank you for that. Um yeah, I don't have anything to add, I don't think. Um it's going to be a very big deal. Um, and I know that we at Renaissance and pretty much everybody in the investing space is going to be watching it very closely. So yeah, now looking further out, filing activity is starting to shape the summer calendar. Uh, we had Neutron Holdings, aka Lime file on Friday. Uh, this is a scooter rental company that was, I guess, planning to go public back in 2022. Well, four years later, here they are.

SPEAKER_01 8:51

Yeah, and the the newsletter line on this was good. Every VC is scanning their portfolio for businesses that AI won't disrupt. Scooter rental probably qualifies.

SPEAKER_02 9:01

Yeah, I'll say that's a compliment, though maybe a mild insult to Lyme because reading through the prospectus, I feel like this one is going to pitch a heavy tech angle, maybe heavier than it should. But I do hope they take this to heart because in this market, AI resistant um has actually been a selling point, especially after all those disruptors got disrupted. So anything else surprise you about Lyme, Matt?

SPEAKER_01 9:22

Yeah, looking through the S1, I would say the debt. Uh Lime has over a billion in debt, kind of unusual for a VC bat company. Uh the interest is really weighed on earnings. However, much of that will convert to equity on the IPO. Uh, it also has a surprisingly strong EBITDA, over 200 million. Uh, though I would say investors really should focus more on the operating income, given the capex here. And then one more thing, I just want to speak directly to all the IPO bankers and lawyers out there. If you're publishing an IPO prospectus without a table of contents links on each page, don't please. It makes it so much harder to navigate. Yeah, I'm sending up my soapbox again.

SPEAKER_02 9:58

Agreed 100%. And this is coming straight from the people who actually dig through these documents. So please uh take that to heart. Um now, someone who did provide those links for us, applied aerospace and defense also filed. Um, so more defense supply coming. Uh that pipeline keeps growing, which makes sense given where the spending is going.

SPEAKER_01 10:18

Yeah, so the broader point, new filers are putting a real summer deal calendar into view. And if macro holds, Q3 can be real meaningful.

SPEAKER_02 10:27

So let's head to the market scoreboard. Bit of a mixed picture this week, the IPO index down 0.6%, uh SP up 2.3%. So that is kind of a notable underperformance gap.

SPEAKER_01 10:39

Yeah, again, two names doing a lot of the work here. Uh billion to one up 19% on an earnings beat, advanced diagnostics, clean fundamental story.

SPEAKER_02 10:49

Yep. And then at the bottom we had Clavio down 31%, strong Q1, uh, but soft margin guidance and a CFO departure. So the market really wasn't reacting to the numbers here. It looks like it was reacting more to uh the signal.

SPEAKER_01 11:02

Yeah, uh CFO departures can spook investors and you know, the margin guidance softness in a market that's already kind of skeptical of SaaS multiples, that's a double hit there.

SPEAKER_02 11:12

Mm-hmm. Uh so zooming out, what's the honest read on where the IPO market stands right now? Um, I'd say on the surface, the IPO market looks like it's in full swing, but it feels more precarious than that. Um, I think that's the right framing, especially going into next week.

SPEAKER_01 11:29

Yeah, so I'd say it's a combination of FOMO and caution. Investors will pile into a hot deal, but they need a clean story, a macro tailwind, and no red flags. The bar for execution is high.

SPEAKER_02 11:41

Mm-hmm. The three billion dollar deals next week are going to be the real test. Um, if all three price well and hold, we might see a shift in this narrative, but if one stumbles, it could really put a ceiling on this whole thing.

SPEAKER_01 11:54

Yeah, and the uh the underlying macro hasn't really changed. I think the ceasefire has helped, but an actual end of the conflict would matter a whole lot more until then this window is at risk of closing again.

SPEAKER_02 12:06

But that said, the pipeline is building for the summer, the deals are getting bigger. Um, but I think, yeah, we're really still sitting on that precarious. Um, that's like the honest word for where things are right now. So, all right, what are we watching for next week? Obviously, Cerebrus pricing is gonna be the largest AI IPO ever. Uh, and if it clears that$3.4 billion cleanly, that is a pretty clear statement.

SPEAKER_01 12:29

And then besides that, Fervo and Blackstone Digital, you know, these are watching investors whether they'll take that pre-revenue risk and whether the READ structure finds its buyer base.

SPEAKER_02 12:40

Uh and the aftermarket on Hawkeye and those other recent pops, uh, we'll see, you know, day one is uh one thing, but week two is where the real signal is.

SPEAKER_01 12:49

That's right. So big week ahead, a lot riding on an infrastructure.

SPEAKER_02 12:56

So that's it for this week's winners and losers. Get the full newsletter in your inbox by clicking the link in the description. Thanks for listening. And before we go, please listen carefully to our full disclosure. This podcast is for informational purposes only. Renaissance Capital statements should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Certain of the statements contained may be statements of future expectations and other forward-looking statements that are based on Renaissance Capital's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. Past performance does not guarantee future results. One cannot invest directly in an index.