IPO Winners & Losers: SK hynix, AI Infra Risk, and Sandwiches

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

Get the newsletter in your inbox every week.

This week:
• The IPO Index caps off its best quarter in years, outpacing the S&P 500 by a wide margin
• Bending Spoons pops after pricing above the range, showing software can still find demand
• Lime finally gets its IPO window after years of waiting
• SK hynix prepares for a massive US cross-listing tied to the AI memory boom
• Jersey Mike's and Cumberland Farms enter the pipeline as consumer IPOs test the waters

We also discuss whether Q2's IPO momentum can carry into the summer, why CopperTech’s postponement shows investors are still selective, and why the IPO pipeline is starting to broaden from AI infrastructure to software, chips, and even sandwiches.

Transcript

SPEAKER_00 0:01

This week's winner, the IPO Index, again with a stellar end to Q2. This week's loser, the IPO market's hottest theme.

SPEAKER_01 0:09

And with the best IPO quarter in years and three successful listings this week, is the empty calendar a pause or a setup? Let's get into it with this week's winners and losers.

SPEAKER_00 0:23

Quick note before we dive in. 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.

SPEAKER_01 0:41

Avery, before we uh get into it, uh did you see that ludicrous display last night? That's another way of asking if you saw the soccer game.

SPEAKER_00 0:49

I'm not I'm not much of a World Cup fan. I know it's kind of heresy.

SPEAKER_01 0:54

Uh yeah. Uh now I will say I'm not a fairweather fan. I've been ride or die US men's national team for weeks now. But if we lost, I would probably have renounced my citizenship and moved to Bosnia and Herzegovina. That was who we played last night. We won, by the way.

SPEAKER_00 1:13

But uh, you know, I guess we're lucky then.

SPEAKER_01 1:16

Yeah, no, skill. I'll skill. All right, sorry.

SPEAKER_00 1:21

No, no problem. Um, yeah, I'm sure that's gonna be a hit for the World Cup fans, but unfortunately, I not a s not a sports girl. No. So let's walk through the week now. Uh though the number that matters most isn't the weeks, but the quarters. Uh, there were a lot of headlines in Q2, but this one is the whole story. The IPO index ended up 42% compared to the SP 500, 15% gain. That's the basis for pretty much all of our optimism heading into Q3.

SPEAKER_01 1:52

Yeah, no doubt. That and the uh successful SpaceX listing, of course, uh the logic is simple. IPOs pick up when new stocks outperform. When buyers make money on the last batch, they come back for the next one.

SPEAKER_00 2:05

Yeah, and to build on that, three deals priced this week, all three traded up initially. Um, so that's a pretty clean sweep.

SPEAKER_01 2:12

Yeah, and uh the interesting thing to me is that despite that monster quarter we just witnessed in the IPO index, we're not seeing the same enthusiasm with new listings. Not half of them anyway, uh, which we can talk more about in a minute. But uh just to put a button on the framing for this week, we've got a thin IPO calendar ahead. Not unexpected right after July 4th, but uh starting next week, we really need to see some of these names move forward.

SPEAKER_00 2:37

Yeah, but heading back to the deal side, um, let's start with what actually got done. Uh first up, we had Bending Spoons, which is that digital business acquire. They priced above the range, raised $1.7 billion, and then popped 40%. Came back down a bit in the aftermarket, but still definitely the standout for the week.

SPEAKER_01 2:57

Yeah, that one was very interesting to me. It shows that even out-of-favor software stories can have a second life. That was the one that had uh Eventbrite, AOL. Uh Avery, I did have a bit of a George Costanza moment last week when uh you said that you didn't like the name for their employees, uh Spooners. And I thought afterward, well, it could be worse. They could be called forkers. I just had to get that in, sorry. Uh it was too good not to not.

SPEAKER_00 3:25

No, yeah, that's a great, great reference.

SPEAKER_01 3:27

Uh so then, of course, uh beyond bending spoons trading up, we had ITG, that's uh broadbare broadband engineering services uh backed by Oak Tree. That deal was interesting at price well below the range. It climbed 11% on day one and then pulled back significantly on day two. So, you know, it's fair to say that PE firms are just scouring their portfolios looking for industrial companies that have some sort of AI data center growth angle and then just bringing them to market. Uh, it looks like some of these are working, uh, looking at INEO, Madison Air, maybe Doncasters, and then some of them are not, like EROC and uh looks like now ETG or ITG.

SPEAKER_00 4:09

Mm-hmm. Yeah, this is uh something that I touched on in a piece we did earlier this week, uh, looking at um AI infrastructure as kind of the latest buzzword, uh, where companies are just kind of throwing in data center into their prospectus and hoping it sticks. Um yeah, in some cases it's it's work, it's working. They have real exposure to this build-out and um they're doing well. And then some I think investors are kind of already seeing through uh that really kind of superficial um uh me too. Um and with ITT, you know there's something interesting going on when a deal prices that far below the range and still trades up double digits. Um, but in this case, that early, maybe AI-related demand, just wasn't as sticky as they probably had hoped.

SPEAKER_01 4:54

Yeah, uh, and then beyond that we had Lyme, that's the uh bike and e-scooter rentals. Uh that one priced at the midpoint, end of the week flat. Uh so you know, Lyme waiting for years for its window and it finally got it. Uh I don't think anyone was expecting anything too crazy here. Uh, it's just the best operator in an industry that has had its share of trouble. So I think you know both things were true there.

SPEAKER_00 5:19

Different sectors, different pricing outcomes, all solid debuts, even if day two wasn't the best. So we're seeing that breadth, not just one hot name carrying the week.

SPEAKER_01 5:30

Yeah, agreed. And uh we'll want to see more of that breadth as we carry this Q2 momentum into Q3.

SPEAKER_00 5:37

Yeah, and not everything got done. Uh the miss is worth talking about for a minute. Uh that was Vedanta's CopperTech Medals, which postponed its $400 million IPO, citing market conditions.

SPEAKER_01 5:49

Not a common occurrence this year either. The last official IPO postponement was Clear Street in February. So some additional context here. The postponement follows a string of kind of uninspiring returns for mining IPOs. So this one was not exactly a one-off. Uh, could also have been some deal-specific issues here. I know our analyst said that he had to work a lot to untangle the structure. And on top of that, uh, you know, here's a company that's not long ago in a bitter dispute with the government of Zambia over that mine.

SPEAKER_00 6:17

So Yeah, it tells us the bid is broad, but it's not indiscriminate. Investors are still drawing lines.

SPEAKER_01 6:25

Yeah, and that's actually the reassuring part. Uh a market that just says no to something is a market that's doing price discovery and not just chasing everything.

SPEAKER_00 6:33

Mm-hmm. And that's important as we start looking ahead because the calendar suddenly gets very short. Uh, we just have one deal on the roster, but oh boy, what a deal. It's SK Heinex, which is gearing up for its $25 billion plus US cross listing.

SPEAKER_01 6:50

Yeah, no formal deal launched this week, but uh looking at their Korean filings, they had indicated a July 10th trade date. The scale is just huge. Uh, the memory chip giants shares are up more than 200% year to date in Korea with over a $1 trillion market cap. So this is an AI memory story that's striking while the iron's hot. And just to emphasize that uh their net income jumped from $5 billion in uh the first quarter of last year to $25 billion in the first quarter of this year.

SPEAKER_00 7:20

Yeah, it's uh huge company. It's going to be an interesting deal. It's kind of uh uh maybe not unsurprising for a cross-listing to be accelerated like this. Um, but with a company this huge, it's definitely, and I think not as well known to American investors. Um it's interesting that how little time they're going to get to really, I think, dig into the details of the deal. Um, but yeah, cross-listing, like I said, not typical IPO, can sometimes get less attention because it's traded elsewhere. Uh, but at this size, it dominates the week by itself.

SPEAKER_01 7:55

Absolutely. Uh also waiting in the wings, we've got C Square, a data center owner, and then standard nuclear on SMR fuel. So both kind of plug in to the AI power theme.

SPEAKER_00 8:08

So even the quiet week has the potential to be thematically loud. Memory data centers, nuclear fuel, all downstream of kind of that same AI demand. But we actually saw a shift away from the AI theme in the pipeline this week with some unexpected names. We had two kind of fun additions: Jersey Mics and Cumberland Farms, uh, sandwiches and convenience stores. I know that in college I went to both a lot. So excited to see those in the IPO pipeline.

SPEAKER_01 8:36

I wish there was a Jersey Mike's near me. Not a whole lot in New York City, but uh I like them. Um interesting too, because this is also the opposite of that AI moonshot trade. We're looking at boring, cash-generating, consumer-facing businesses. Uh, maybe a bit of that AI resistant theme we were talking about in Q1.

SPEAKER_00 8:56

And it's interesting because consumer has been absolutely punished all year. Um, but these are profitable, well-known brands. Uh, and I think importantly, with a history of executing on growth plans.

SPEAKER_01 9:09

And that might be the point here. If the market can absorb both a trillion dollar chipmaker and a sandwich chain, that's real depth. Uh but uh I know Jersey Mike's valuation was rumored to be around 12 billion in January. I think they'd struggle to get that now. But restaurant stocks have stabilized over the past month. And really, I do applaud them for moving forward. I get uh so annoyed when I, you know, see these companies that are just waiting for the perfect market, they're waiting for years. And you know, I appreciate it when uh stock is willing to make the leap even when market conditions are not totally ideal.

SPEAKER_00 9:45

You heard it here. We're rooting for you, Jersey Mike.

SPEAKER_01 9:48

Yeah.

SPEAKER_00 9:49

Now to the scoreboard for existing new stocks. Uh, it was a solid week with some twists. Uh the IPU index end of the week up 1.1%. So slightly lagging the SP 500, which closed up 1.8%. Yeah, a slight divergence from the pattern we saw at the end of Q2.

SPEAKER_01 10:06

Yeah, with the IPO index this week, definitely a last shall be first and first shall be last kind of week. Um, figure led the IPO index winners up 25%. Haven't seen fintech up there in the winner's circle lately. I like figure though. Uh I think the blockchain angle means people often confuse it for like a crypto play. Uh, but it does have a strong lending business underneath. And then we've got uh defense company Carmen, number two, followed by three software sellers all trading up Salepoint, Figma, and Rubrik. If we're seeing a software rebound, then that's very good news for the IPO pipeline.

SPEAKER_00 10:41

Yeah. Um, and another twist there, the losers were mostly AI infrastructure names, which sank on news that Meta would be launching a cloud infrastructure business.

SPEAKER_01 10:51

Yeah, right. Core Weave at the bottom of the index, down 15%. That's a competitive threat headline, not a demand problem. I know SpaceX did pull back a little bit on that news too. Remember that Starlink is really the high quality earnings of that play. Well, they have less of a competitive moat around that neo-cloud story, at least until we get orbital data centers.

SPEAKER_00 11:12

Yeah, so worth keeping an eye on how it all plays out. Um, when a hyperscaler moves in-house, the arms dealers get re-rated. So this maybe could be the real first or the first real crack in the AI infrastructure trade.

SPEAKER_01 11:28

I mean, Meta just has that bazooka of cash, you know, you have to uh worry when uh they're willing to uh move in.

SPEAKER_00 11:35

Meta does everything.

SPEAKER_01 11:36

They do the glasses with the cameras and the if something's working, Meta will try and acquire it or build it or copy it.

SPEAKER_00 11:44

Yeah. Good old Zuck.

SPEAKER_01 11:46

Yeah.

SPEAKER_00 11:48

So zooming out, what does the quarter and this week actually add up to? Uh the setup is as good as it's been. Like you said, Matt, best IPO quarter in years. Three clean wins this week, and the IPO index is still outperforming.

SPEAKER_01 12:03

Right. And the breadth is the real signal here from bending spoons to Lyme to ITG, all getting done and the market finding a clearing price.

SPEAKER_00 12:11

But the market's still selective. Copper tech pulled on headwinds in the mining sector. So buyers are saying yes and no.

SPEAKER_01 12:18

And that new wrinkle we were just talking about, the meta headline shows that AI infrastructure isn't bulletproof. There is competitive risk entering the conversation now.

SPEAKER_00 12:27

And at the same time, some of those out-of-favor themes are trading up now. So now the calendar is about to test the AI conviction with that one mega deal next week. So now, what are we watching as we head into this quiet week? Above all, SK Heinex. That's a $25 billion plus cross-listing. It's the whole calendar. First deal of Q3. So even as a more unique deal, how it lands could definitely set the tone.

SPEAKER_01 12:56

Right. And of course, we'll see how infrastructure IPOs react after the meta news. You know, do we see some of that competitive weakness spread, or was it more of a one-day reaction? I mean, we did have Cerebrus rebound a bit this week. Very volatile stock, but nonetheless, decent trading.

SPEAKER_00 13:11

Yeah, and then the pipeline. Um, Jersey Mics and Cumberland Farms testing appetite for those out-of-favor consumer names, um, and several other deals, probably still hoping to capitalize on that AI infrastructure demand.

SPEAKER_01 13:24

All right. Best quarters in the books. Now we'll see if the summer delivers.

SPEAKER_00 13:29

Yeah, it's gonna be a hot one.

SPEAKER_01 13:31

Oh, a good one.

SPEAKER_00 13:33

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. Um, 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.