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Thursday, July 9, 2009 8:45 AM

What to take from Genworth's IPO

Andrew Willis

At first glance, the largest IPO that Canada has seen in 18 months looks likes a flop.

Genworth MI Canada MIC-T shares slumped Wednesday in their debut on the Toronto Stock Exchange. Shares sold at $19 each in the initial public offering ending the day at $17.89.

The country’s second largest mortgage insurer raised $850-million in this offering, and it’s one of the few successful IPO seen in the past year.

While everyone involved would have loved to see this stock pop as it debuted, there’s no mystery as to why that didn’t happen. It’s impossible for any stock to shine when the whole market is on a downward grind, and that’s what Genworth was up against.

The Genworth IPO was priced on the last day of June. It didn’t being trading until eight days later.

During that period, a string of depressing economic developments had the S&P/TSX index in constant decline. It dropped 7 per cent by the time Genworth debuted on July 8. Against that backdrop, the insurer’s weak opening was predictable.

Step back from Wednesday’s market activity, and you realize that the noteworthy event isn’t Genworth’s first day of trading. It’s the fact that a large, high-quality company has gone public in Canada.

The one decision that could be second-guessed is waiting so long between pricing the deal and opening trading. It’s possible to ring the exchange’s bell and let the stock rip on a “when-issued” basis as soon as a price is set. Here, that approach would have made for a better opening, but we would have ended up in the same place.

CIBC World Markets, Goldman Sachs and Scotia Capital led the Genworth IPO.

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Streetwise Contributors

Andrew Willis

Andrew Willis joined The Globe and Mail in September of 1995. His career has included stints at a number of publications, including The Financial Post, The Financial Times of Canada, Dow Jones/Wall Street Journal, and MacLean's magazine. He also did freelance writing for Investment Executive magazine. He appears on television for BNN TV and CBC Newsworld.

Andrew has co-written a book, The Bre-X Fraud, with business journalist Douglas Goold.

Read Streetwise Tuesday through Friday in the pages of Report on Business.

 
Boyd Erman

Boyd Erman

Boyd Erman is a long-time business journalist who has worked at Dow Jones, Bloomberg, and the National Post before joining the Globe and Mail. Over the years, his areas of coverage have included economics, monetary policy, debt markets and corporate finance.

In addition, he is a regular commentator and guest host on Business News Network.

 

Steve Ladurantaye

Steve Ladurantaye wrote about technology companies in Ottawa before reporting for the Peterborough Examiner and Kingston Whig-Standard, where he won a National Newspaper Award for explanatory journalism. After joining the Globe and Mail in 2007, his work has regularly appeared in Report On Business and Globe Investor Magazine.

 
Globe and Mail reporter Tara Perkins

Tara Perkins

Tara Perkins has been a business reporter since 2004, following a brief stint as overnight editor of globeandmail.com. She has been writing for the Globe's business section since the spring of 2007, covering the banking sector during the course of the financial crisis. Prior to that, she worked for the Toronto Star. Tara has a Bachelor of Journalism from Ryerson University and a Bachelor of Commerce from the University of Guelph.

 
 

Jacquie McNish

Jacquie McNish has been a business writer with The Globe and Mail since 1988. Prior to that she was a reporter with The Wall Street Journal.

During her time at The Globe and Mail, she has served as the paper's New York correspondent and won three National Newspaper Awards. She is the author of The Big Score: Robert Friedland and The Voisey's Bay Hustle and Wrong Way: The Fall of Conrad Black, for which she and co-author Sinclair Stewart won the National Business Book Award. She is a co-host of Market Morning on the Business News Network.