EcoSynthetix Inc. pulled off a coup by pricing one of the biggest Canadian-renewables initial public offerings ever in the midst of rough markets and the spectre of a U.S. default, but don't look for a wave of IPOs following it.
EcoSynthetix, which focuses on renewable polymers, raised $100-million in an IPO last week led by the Canadian office of UBS Securities, Canaccord Genuity and RBC Dominion Securities.
It's up there with the IPO of Magma Energy, now known as Alterra Power, for the title of biggest Canadian alternatives IPO ever. All that for a company that's not making money, in the mid summer doldrums, with the prospect of a U.S. default hanging over markets.
EcoSynthetix did end up pricing at the bottom of the expected $9-to-$11 a share range, but even so, not bad considering the context.
So does that signal a hot-weather IPO window that's opened? Not exactly.
From here on out, bankers expect August to be very quiet on the initial public offering front, given the uncertain state of markets and the fact that many investors are away from the office.
Bankers are more bullish on the market for equity issuance after Labour Day as the list of issuers looking to sell stock is mounting. Even then, the big question is the strength of demand. As one banker noted, the issuance calendar at the moment is dominated by deals that are driven by bankers and companies, not big demand from investors.
So why go now for EcoSynthetix?
The IPO process was underway well before the markets took their beating and the debt ceiling debate really heated up.
The company had given an IPO promise, and some of its shareholders were looking for liquidity. While the big owners are locked up post-IPO, once the lockup comes off in 180 days they'll have an open market to sell into.
And for EcoSynthetix's venture capital owners, even the $9 is a nice valuation and a big win, as venture capitalist Mark McQueen pointed out on his Wellington Financial blog.
The cash will enable the company to fund its capital expenditures, and those familiar with the company say that from here on out the company should be able to fund cap ex from cash flow.
The stock will start trading Thursday on the Toronto Stock Exchange under the symbol 'ECO'.