IPO Winners & Losers: Q2 Breakout, Cerebras Cracks, and Theme Wins

Welcome back to Renaissance Capital’s IPO Winners and Losers — the weekly podcast breaking down the biggest stories shaping the IPO market, new stocks, and Wall Street sentiment.

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This week:
• The IPO market caps off a blowout Q2, with the IPO Index absolutely ripping
• AI-linked new stocks pull back as Cerebras breaks below its IPO price for the first time
• Doncasters soars by tapping into aerospace and AI power demand
• DSC Holdings delivers one of the worst IPO debuts in decades
• SK hynix files for a potential $25 billion-plus US listing as the mega-IPO pipeline deepens

We also discuss why Q2 may have confirmed the IPO market’s breakout, why the second half could be more volatile, and why theme, valuation, and pricing discipline are separating the winners from the losers.

Transcript

SPEAKER_00 0:01

This week's winner, Doncasters, a 238-year-old company that played on the two hottest themes at once. This week's Loser, a Chinese auto dealership platform with the worst IPO debut in at least 20 years.

SPEAKER_01 0:14

And with a blowout Q2 in the books, the real question is whether the second half can hold the line. Let's get into it with this week's winners and losers.

SPEAKER_00 0:26

Quick note before we dive in, this podcast is for informational purposes only, and nothing we discussed 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. So normally I'd say let's walk through the week, but let's start with the quarter because the headline is the base that just broke out. In case you missed it, we released our port on Q or report on Q2 this week, and even without the largest IPO of all time on the board, it was a supersized quarter.

SPEAKER_01 0:59

Yeah, so with SpaceX, the biggest quarter ever by proceeds. Without SpaceX, the biggest quarter since 2021. But uh here's the number that really matters. The Renaissance IPO index up more than 30% on the quarter. So, you know, returns over deal stats every time.

SPEAKER_00 1:18

The old Wall Street adage in the newsletter really captures it. The longer the base, the bigger the breakout. Uh we had several quarters of what it really felt like treading water and then this huge splash.

SPEAKER_01 1:29

Yeah, that's that's very true. But uh take a look at the IPO index this week, down 4.3% with the SP 500 off 2%. So we break out and we pull back in the same breath. Uh that feels like the story of the first half. Volatility has just been the name of the game with the AI trade.

SPEAKER_00 1:46

Mm-hmm. Uh and speaking of the index, let's get into what came back down this week because it's the names you'd expect. First, AI led the rally, then AI led the pullback. Uh, we had ARM down 23.9% this week, Cerebrus down 22.6%, both at the bottom of the IPO index loser, IPO indexes losers, uh, and also had core weave in the red.

SPEAKER_01 2:09

Yeah, and the the Cerebrus detail is one to flag. Uh it actually broke below its IPO price for the first time. In their first quarterly earnings report, they beat on revenue as expected, but margin guidance looked weak. That plus a lockup release means you're looking at a drop.

SPEAKER_00 2:25

It is hard to be shocked. Uh, we talked about this when it popped 68% on day one. Price perfection almost always meets an ugly reality later on.

SPEAKER_01 2:36

Yeah, I remember when uh Shrewbrist went public, we did point to lockup releases and AI sentiment is the exact potential stumbles that could compress the multiple. Uh I remember saying if the AI sector falls 10%, Shrewbris falls 20%. Well, when a company prices $65 above the midpoint and then gains another $125, you would know the stock is walking a tight rope.

SPEAKER_00 2:59

Yeah, that is a really great metaphor, especially with a stock that had like has had this crazy aftermarket volatility. I mean, just huge price swings. Um, feels like it's really hard to stay balanced when you're moving that much. Um, but then we had the counterweight, apogee therapeutics up nearly 47% on news that it was going to be acquired by ABP. Uh, so beyond the tail ones that we've seen in that sector this quarter, it's a reminder that MA is still playing out in biotech. Then on the deal side, we had three IPOs priced this week. Uh the spread between them is the Q2 story in a nutshell. Doncasters was the standout. Um, it makes engine and gas turbines. Uh, it upsized, priced above the range, raised $919 million, and then soared 44%.

SPEAKER_01 3:51

Yeah, and here's why it worked. It sits inside two capital raising themes at once, both aerospace and a data center play. Uh actually electricity, uh AI-powered electricity. Uh so you know, a company that was established in 1778 that reads like a 2026 IPO.

SPEAKER_00 4:11

Yeah, that's pretty crazy. A company that's almost as old as the United States. Yeah. Reading like an IPO that's uh this year.

SPEAKER_01 4:20

They're adaptable.

SPEAKER_00 4:21

Um yeah. Uh it's the same lesson that we saw throughout Q2 as well. That theme is the multiplier. And it's something that we highlighted in the review looking at these trends across sectors. Um, but then we had silver miners. Cinda get a shrug, down about 1%. It's the latest in a string of exploration stage mining deals that have delivered pretty mediocre returns.

SPEAKER_01 4:43

Yeah, and then lastly, the cautionary tale this week uh Chinese used car software platform and marketplace, DSC Holdings, created 47% on day one. That is the worst debut in our entire database for US IPOs, raising at least 50 million. And then it sank another 20% on day two. Uh, this was a Deutsche LED deal, call it the China discount, point to the low effective float, either way, just brutal trading.

SPEAKER_00 5:10

So in one week, you've got the full range. Right theme and you fly. No theme and you flatline. Wrong story and you get crushed just mercilessly. Um, so looking ahead to what's going to price, we have four deals racing in ahead of the July 4th holiday. Bending Spoons is the biggest, targeting a $1.6 billion raise. This is an Italy-based firm that buys out-of-favor digital businesses and runs AI on them. Uh, this is one that we mentioned when it filed uh because its portfolio includes some throwbacks like AOL uh as well as Eventbrite and Vimeo.

SPEAKER_01 5:50

Yeah, definitely a genuinely different model. It almost feels like you're getting a PE buyout fund here. Uh they're doing a roll-up of digital properties plus AI optimization on top. I know our report actually said that there are some cases where they're buying a business and then cutting two-thirds of the workforce, uh, having their own team of what they call spooners run the back end. So uh yeah, not a fast-growing AI company, but rather a fix-it-with AI thesis. Really curious how the market prices that.

SPEAKER_00 6:22

Yeah, call it a roll-up 2.0, maybe. Yeah.

SPEAKER_01 6:25

I think so.

SPEAKER_00 6:26

Uh and I have to be totally honest, I absolutely I saw that Spooners in the prospectus. I absolutely hate that term. Please, please change that.

SPEAKER_01 6:35

Yeah.

SPEAKER_00 6:36

Um, but beyond that, we have Lyme, which is the Uber-backed scooter company that we've been waiting on for a few years. Uh, IPG, which does broadband engineering, and then CopperTech, which, surprise, does copper mining.

SPEAKER_01 6:50

Yeah, so Lyme has that AI resistant angle that we flagged before. Um, I know that there's been some bankruptcies in this business, but I walked away from the research meeting thinking that it was not as bad as I expected. Um, the CapEx is a concern, but you know, they were they were more profitable than I thought they would be, um, and at least on a going forward basis. Uh and then yeah, that copper miner, uh, copper ties directly into the electrification and data center demand story. Uh, that's the theme thread, even in a holiday week next week.

SPEAKER_00 7:19

Mm-hmm. But chiming in with mild reality check, because these are smaller, more varied names. So maybe not indicative of a flood, I guess, right now. But on the note of a flood, everyone's uh been waiting on the filing wave, and it's still not here yet. The honest read from the newsletter is that investors are still waiting for the floodgates to open, and we're not seeing it on the filing side yet.

SPEAKER_01 7:44

Yeah, but the one that landed is huge. Uh SK Heinex filed for a US listing that could raise more than $25 billion. That's the Korean memory chipmaker that is listed in Seoul. And wow, its shares are up more than 300% year to date.

SPEAKER_00 7:59

Yes, and past listeners will have caught this. We previously highlighted SK Heinex as the sleeper mega IPO in the pipeline. The AI memory demand story is huge. Um, and yeah, pointing to even things like Sand disk or Seagate, um, it's just kind of a huge trend right now.

SPEAKER_01 8:20

It makes sense. I mean, if they are doing so well, uh, might as well tap into US markets, which are you know known for being robust. And uh these companies do have a lot of uh uh spending requirements. So uh, you know, we're seeing the mega deal pipeline just keep on deepening, uh, SpaceX, the AI names, and now this 25 billion plus uh chip filing, but we're just not seeing that flood of diverse industries yet. Uh still waiting on it. I think it'll come based on that index performance. Uh oh, Avery, by the way, on the topic of open AI, uh there was news this week that Sam Altman was leaning towards 2027 because he thought SpaceX wasn't hot enough. Uh he really wants to make sure that he gets that $1 trillion valuation. But uh I almost didn't want to mention it because Avery, you know my theory. I still think OpenAI is trying to fake out Anthropic in order to uh you know have its guard down and then open AI can go first.

SPEAKER_00 9:22

Yeah, I think that's a good theory. I was actually talking to a reporter this week about that. Um it seems like anthropic, it's kind of, you know, whatever, go first, go second. Um, if its metrics are as good as they are reportedly, then I don't think it really matters. Whereas OpenAI, it seems like they really have to go first.

SPEAKER_01 9:43

They should, yeah.

SPEAKER_00 9:45

Yeah. Um, but we also had uh another filing, a rare one, women's wear brand reformation filed for an estimated $200 million IPO. Um, very interesting because consumers have been punished all year. So any consumer filing at this point is a signal worth watching, especially in that uh you know threat of um wanting what waiting for this window to broaden beyond these themes that we've seen.

SPEAKER_01 10:11

Avery, have you ever shopped at the reformation?

SPEAKER_00 10:15

No, I um yeah, any any uh consumer IPO that does shopping, I guarantee I have not. I own the same wardrobe that I have had for like probably five to ten years.

SPEAKER_01 10:27

Yeah, me neither haven't shopped there myself. Uh website is the reformation. Um you think the Protestants are gonna buy this one? Not one mention of Martin Luther in the prospectus, by the way.

SPEAKER_00 10:39

Well, that's just disappointing.

SPEAKER_01 10:42

But they do say um, this is a quote being naked is the number one most sustainable option. We are number two. Avery, I don't care what anyone says. I would never use the words we're number two in a prospectus. That's my that's my line.

SPEAKER_00 10:58

Yeah, followed, yeah, following up right after, yeah. Go ahead and be naked.

SPEAKER_01 11:03

Yeah.

SPEAKER_00 11:03

That that is an yeah, that's uh interesting marketing. But uh, but zooming out now, what does uh what does a blowout quarter that ends on a down week actually tell us? So Q2 was the breakout we've been waiting for. The IPO index absolutely ripping and this huge jump in proceeds, even without SpaceX.

SPEAKER_01 11:26

Right, but of course this week is the asterisk. The pullback, uh cerebrisk going sub-IPO, the second half is going to be a two-way street. Volatility is the only constant.

SPEAKER_00 11:37

The pattern is clear though. Theme is the dividing line. Doncasters five flies on aerospace and AI power, while the no theme deals get left behind.

SPEAKER_01 11:48

Yeah, and that same price to perfection risk we keep flagging is now showing up in the tape and not just the talk. I think that's the difference this week.

SPEAKER_00 11:56

Yeah, agree. Uh and the filing side says the same thing. These mega names like SK Heinex keep moving, but no broad flood yet. Uh, still seeing pretty selective appetite, not a free for all free-for-all. Um, so far, this would mean moderate activity in July. So, all right. What are we watching as we head into the holiday and the back half of the year? First up, the four pre-July 4th deals, especially bending spoons, whether that AI roll-up model gets a premium, um, as well as whether Lyme finally gets the IPO window.

SPEAKER_01 12:31

Yeah, and then SK Heinex in the backlog now, $25 billion plus filing, reshapes the mega IPO calendar. We'll be watching for terms and timing.

SPEAKER_00 12:41

Yeah, and of course, more cerebrus aftermarket. Now that it's below its IPO price, is this the bottom or the start of a broader AI recalibration? Big implications for every AI name still to come.

SPEAKER_01 12:54

And of course we'll be watching for more filings too, every week from now on. Uh but uh with a strong quarter behind us, a potentially volatile half ahead, we say stay invested, stay disciplined, and stay classy, San Diego. Little anchor man there. And that's it for this week's Winno's and Losers. Get the full newsletter in your inbox by clicking the link in the description. Thanks for listening, folks, 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 maybe 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 differ materially from those expressed or implied in such statements. Past performance does not guarantee future results, and one cannot invest directly in an index.