It was just yesterday when the Wall Street Journal was getting me all amped up about the U.S. IPO market, and what it might mean for the folks back here in the Dominion:
Another sign of rising investor appetite for stocks: More initial public offerings are being priced at the high end of expectations.
In the first quarter, 36% of U.S. IPOs were priced above the range originally outlined in registration documents filed with the Securities and Exchange Commission. That was the highest proportion in any year since at least 2004, according to Renaissance Capital, an IPO research and investment-management firm.
Meanwhile, less than one quarter of IPOs so far this year have priced below expectations, also the lowest rate in at least 10 years.
“Post financial crisis, the IPO market labored under a wider-than-normal IPO discount,” said Jeff Bunzel, head of equity capital markets for the Americas at Deutsche Bank AG.
Investors’ appetite for risk is growing again, he said, noting U.S. stocks are attracting more investor interest and that is filtering through the IPO market.
With that backdrop, however relevant it is or isn’t to the Canadian scene, I’m delighted that Bay Street has decided to go out into this receptive environment with a high quality story like Halogen Software first. All too often, folks try to shove the turkeys out the window in the hopes that a strong market wind will give them loft. It has been a long time since anyone was at all excited about tech shares on our local bourse (see prior post “The best domestic tech IPO momentum of this century” May 18-07). Let’s not screw it up out of the gate this time with low quality product, I say.
For those who read this blog with any regularity, you’ve known for weeks that Halogen was soon to be coming down the pike (see prior posts “Two Tech IPOs moving to the launch pad” Feb. 24-13 and “What impact will NexJ have on the next crop of Canadian tech IPOs?” Mar. 9-13). But that and $4.15 will get you a Latte.
The Halogen underwriting syndicate is interesting, with Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. leading, and Raymond James Ltd., Cantor Fitzgerald Canada and National Bank Financial rounding out the team. In my life I’ve never seen that group together on a deal, even under their predecessor firm names, which says a great deal about how the growth capital equity market is evolving in Canada. Perhaps I should say “North America”, since it seems the syndicate was structured, at least in part, to appeal to a broader audience. Plus guarantee some quality research coverage with the remaining commish; just as I would want if I was the CFO.
Best of luck to the Halogen team and VC investor crew. You deserve every success. I just hope some local institutional investors have learned the lessons of the past half decade (see prior post “$1.1B Q9 Networks deal another reminder that Canadian markets don’t get tech” June 4-12 and “Belair / Ericsson deal a wake-up call for every Institutional Sales Desk” Feb. 22-12). That’s not to guarantee that Halogen shares will perform like Constellation Software (CSU:TSX), mind you.
But talent management is a hot space, and the company is definitely worth a serious look.
(disclosure: I own CSU)