Montreal’s Stingray upsizes IPO to $140-million

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Montreal media company Stingray Digital Group is upsizing its previously announced initial public offering amid a frothy market for share sales in Canada.

The privately-held company, best known in Canada for its commercial-free music streaming service Galaxie, now Stingray Music, will increase its planned $120-million offering to $140-million. An overallotment option worth about $21-million and a secondary private placement worth $19-million will bring the total deal to about $180-million.

The offer is expected to close on June 3. The stock will begin trading on the Toronto Stock Exchange the same day, under the symbol RAY.

Demand for Stingray shares is high, with the order book now approaching $1.1-billion, according to information obtained Tuesday from people close to the process. The company is nevertheless electing to increase its offering only marginally because it wants to avoid further dilution for its controlling shareholders and also doesn't have immediate use for proceeds beyond what it has already disclosed, according to the source.

"It's a funny thing to have too much money," the source said. "You've got billions of dollars that used to be available for [resource companies that have shifted to tech and other firms]. So it may be crazy. But I think it's good for Canada because now we have these companies [coming to market]."

National Bank Financial, GMP Securities and BMO Nesbitt Burns are underwriting the deal.

Stingray is currently owned by Montreal entrepreneur Eric Boyko, Quebec private equity firm Novacap and media and technology holding company Telesystem. Part of the logic of the IPO is to let Novacap exit its position while Telesystem monetizes a portion of its stake. Mr. Boyko, who founded Stingray, will control the company through super-voting shares.

One analyst who follows the sector said investors are drawn to Stingray's aggressive growth strategy and opportunities in addition to financial execution to date. The company says it has increased both sales and profit every year since 2008.

The stock is being priced at $6.25 a share on the Toronto Stock Exchange, representing about 13 times the company's trailing earnings before interest, taxes, depreciation and amortization. At that price, Stingray's market capitalization will be about $300-million.