Anton Rabie, co-founder of toy company Spin Master, is seen in this file photo.Fernando Morales/The Globe and Mail
Shares of Toronto-based toy maker Spin Master Corp. traded higher in its Canadian stock exchange debut Thursday. The company went public at $18 a share, and the shares closed at $18.25 a share, a gain of just over 1 per cent.
The company raised $220-million in the offering and intends to use most of the proceeds to pay down debt. However, some long-serving employees who held "phantom stock" are getting paid $26-million from the IPO. Phantom stock is akin to a bonus that is paid out to certain employees if and when a company goes public.
The company was founded in 1994 by Ronnen Harary and Anton Rabie, who knew each other from childhood and Ben Varadi, a university classmate of Mr. Rabie. In the early days Mr. Rabie sold the company's first product, a nylon head that sprouted "hair" from grass seed when watered, on the street. Over time the company landed distribution agreements with the likes of Kmart Corp. and Wal-Mart Stores Inc. and diversified into television production and animation.
Spin Master has two classes of shares. The public was sold subordinate voting shares. The principal shareholders own multiple voting shares entitling them to 10 votes, versus one vote that other shareholders receive. The setup means the founders will control 97 per cent of the voting power, which gives them a virtual lock on all decision-making and makes the company virtually protected against a hostile takeover offer.
"We've been great stewards of the business for the last 21 years and think we'll be great stewards growing the business into the future" said Mr. Harary when asked why the company decided to come to market with two classes of shares.
Spin Master isn't the only company to go public this year with a dual-class share structure. Cara Operations Ltd., Shopify Inc. and Fairfax India Holdings Corp. are also structured this way.
Despite the dual-class share structure, Mr. Harary said the company is "very cognitive of good corporate governance" and "gave a lot of thought to what would be the right board composition."
John Cassaday, former CEO of media company Corus Entertainment Inc., is a lead director with the firm. (Corus distributed Bakugan, a Pokemon-like Japanese animated TV series produced by Spin Master during Mr. Cassaday's tenure). Charles Winograd, former CEO of RBC Dominion Securities Inc. is also a board member.
Spin Master competes against global toy makers and entertainment companies such as Mattel Inc., Hasbro Inc., Lego AS and Electronic Arts Inc.
"It is a hit-driven business and there are a lot of uncertainties," said Mr. Cassaday on the vagaries of the toy business. But over time "you begin to understand how to connect the dots," he added.
Spin Master has had its fair share of hits, including Paw Patrol, an animated television series (and merchandise line) that has been distributed globally, about a group of rescue puppies who swoop in to get characters out of a jam.
"Like any toy company they've had their missteps because you're putting your business in the hands of an 8-year-old. Whatever an 8-year-old's whim is what's driving your success or failure." said Christopher Byrne, a toy industry veteran and content director with New York-based TTPM (Toys, Tots, Pets & More).
"They've been very good over the years at identifying products that are good and they've been aggressive at acquiring products."
The Spin Master stock sale was led by RBC Dominion Securities Inc. and TD Securities Inc. Bankers are due to be paid out a commission of 5.5 per cent.
Niall McGee