The month as a whole was relatively mild for deals as is customary for January — IPOs traditionally heat up in spring — though activity accelerated in the final week. By month's end, 12 issuers, including blank-check companies, went public, raising more than $2.8 billion total.
Davis Polk guided five of those offerings, which raised more than $1.8 billion combined, twice representing issuers and three times advising underwriting teams. Most proceeds came from a $1.2 billion IPO by Reynolds Consumer Products Inc. Davis Polk represented the noted household products company while Cravath Swaine & Moore LLP steered the underwriters.
Three more firms guided multiple offerings in January, counting representation of issuers or underwriters. Skadden Arps Slate Meagher & Flom LLP steered three IPOs, led by blank-check company SCVX Corp., which raised $200 million to acquire a cybersecurity firm. Latham & Watkins LLP and Simpson Thacher & Bartlett LLP also guided two deals each.
Reynolds' deal was far and away the largest. The maker of Reynolds Wrap and Hefty bags offered 47.17 million shares at $26 each, within its stated price range of between $25 and $28. The company said most IPO proceeds would be spent on repaying loans, according to securities filings.
Going forward, the household and kitchen products company is looking beyond the traditional grocery business as its main source of revenue and said it is eyeing expansion into e-commerce channels and the home improvement sector. Investors so far have embraced shares of Reynolds, which have risen nearly 16% to exceed $30 each at the close of trading Tuesday.
"It was good to start the year off with a rather big" deal, said Davis Polk partner Byron Rooney, one of the lawyers who advised the Reynolds offering. "What's unusual about it is it's a company that most people are surprised wasn't public. It's such a well-known company, or at least the brands they have are such staples in people's lives."
Among remaining IPOs in January, most came from health care-related companies. Private-equity backed health clinic operator 1Life Healthcare Inc., represented by Cooley LLP, raised $245 million after pricing its IPO at $14, at the low end of its $14 to $16 range.
Two U.S. drug developers also took part in January IPO activity. Cancer drug company Black Diamond Therapeutics Inc., advised by Goodwin Procter LLP, raised $201 million in an upsized IPO that priced at $19 per share, above its range of $16 to $18. Arcutis Biotherapeutics Inc., a maker of skin disease therapies represented by Fenwick & West LLP, raised $159 million by selling 9.4 million shares at $17 apiece, the high end of its expected range of $15 to $17.
Simpson Thacher & Bartlett LLP also helped two real-estate related companies tap public markets in January. The firm represented Beijing-based Phoenix Tree Holdings Ltd., which operates an online co-living platform called Danke that links property owners with mostly young renters willing to share living space in order to save money.
Phoenix Tree raised $130 million in a downsized deal that offered 9.6 million shares at $13.50, down from an original plan to sell 10.6 million shares at between $14.50 and $16.50. Mortgage lender Velocity Financial LLC, also led by Simpson Thacher, raised $94 million after selling 7.25 million shares at $13 each.
Blank-check companies also continue to generate a steady subset of IPO activity. Apart from SCVX, Gores Holdings IV Corp. raised $400 million after selling 40 million units at $10 each, guided by Weil Gotshal & Manges LLP and underwriter counsel Ropes & Gray LLP.
Gores Holdings marks the fourth blank-check company formed by private equity firm The Gores Group. Blank-check companies are shell entities that raise money to acquire private companies and take them public, typically targeting sectors that reflect the expertise of their management.
Looking ahead, the IPO market may hit a pause starting next week. While seven companies are set to go public this week, as of Tuesday only one, biotechnology firm Revolution Medicines Inc., is scheduled to raise money during the week of Feb. 10.
The IPO market normally cools in mid-February given a Securities and Exchange Commission "staleness" deadline that requires most prospective public companies to update their filings to include full-year audited financial statements for the prior year. This year's Feb. 14 deadline means certain companies that don't price by then will have to freshen their financial disclosures, creating a speed bump on the IPO calendar that could slow activity until March.
But with spring inching closer, capital markets attorneys expect transactions to pick up when the weather begins to warm. Many companies are gearing up in the pipeline, including corporate software maker Asana Inc., which on Monday said it filed confidential plans for a public listing.
Rooney said Davis Polk has a "very strong" pipeline heading into the year's second quarter, which begins on April 1. He added that many companies are also beginning the process of hiring underwriters and law firms to begin moving on deals.
In terms of headwinds, Rooney cautioned that companies with international supply lines may be sensitive to fallout from the coronavirus from China. He also noted that the looming presidential election provides an incentive for companies to complete deals earlier in 2020 if possible in order to avoid political uncertainty that could dominate news cycles later in the year.
"That's what is probably driving a lot of people to go to the market sooner rather than later," Rooney said.
--Editing by Breda Lund.
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