A pair of Canadian companies in hot sectors – e-commerce software provider Lightspeed POS Inc. and power generating firm Brookfield Renewable Corp. – have collectively launched more than $1.4-billion of stock sales targeting U.S. institutional investors.
Montreal-based Lightspeed and Brookfield Renewable parent Brookfield Asset Management Inc. are attempting to take advantage of strong investor interest in tech and sustainable energy stocks by announcing marketed equity offerings, primarily led by global investment banks.
Lightspeed plans to sell at least seven million shares worth more than $630-million, based on the company’s stock price Monday. Toronto-based Brookfield is selling at least 15 million shares in its publicly traded renewable energy business, potentially raising more than $800-million for the parent company. Both companies can increase the size of the offerings if there is investor demand for the stocks. And both brought in Wall Street investment dealers to pitch their shares to both domestic and international investors.
Lightspeed hired Morgan Stanley, Barclays and BMO Capital Markets as its lead bankers. The Brookfield Renewable offering is led by Barclays, J.P. Morgan, Morgan Stanley and Bank of Nova Scotia.
Investment banks began pitching the two financings to investors late Monday and expected to set a price on the stock late Tuesday or Wednesday. Setting aside time to market an offering is unusual for Canadian stock sales, which normally see investment dealers guarantee the share price up front and shoulder the risk of selling the stock. Critics of this approach, known as a bought deal, say it tends to see stock sold to a company’s existing shareholders rather than being marketed to potential new investors.
“In a bought deal, the motivation is to sell the offering quickly after the banks purchase the shares, so they likely are going to their existing clients or investors that they know,” said Ari Pandes, an associate professor of finance at the University of Calgary’s Haskayne School of Business, in an e-mail.
“From the firm’s perspective, it is not clear to me whether ‘existing/known clients’ versus ‘new investors’ makes a difference,” Prof. Pandes said. “From the bank’s perspective, new investors could be a source of new business, which is not necessarily to the issuer’s advantage but more to the bank’s advantage.”
Canadian tech companies such as Shopify Inc. and Telus International have also conducted recent share sales that featured global investment banks in central roles. A number of Canadian bankers said this approach underestimates the abilities of U.S. equity distribution teams at most domestic dealers.
Lightspeed’s stock price has soared since the company went public on the Toronto Stock Exchange at $16 a share in March, 2019. The 14-year-old business helps retailers, restaurants and golf courses serve online customers. It has made a number of acquisitions since its IPO and raised US$305-million last September when it listed on the New York Stock Exchange. Lightspeed shares closed Tuesday at $92.63 on the TSX.
Lightspeed executives declined to comment on the share sale Tuesday, citing regulatory restrictions. Analysts said the company is expected to use the money it raises for additional acquisitions.
“We believe raising equity increases the chances Lightspeed consummates another transaction near-term,” said analyst Martin Toner at ATB Capital Markets in a report Tuesday. “While we believe there are lots of potential targets, in their existing verticals as well as new ones, most of them are private companies. All of the large deals Lightspeed has done to date have been positive for shareholders.”
Brookfield Renewable’s share price has more than doubled since last March and closed Tuesday at $68.22 on the TSX. The company, which owns hydroelectric, solar and wind power producers, is not receiving any of the proceeds from the share sale.
Parent Brookfield declined to comment on the sale owing to regulatory issues. After the offering, it will continue to own approximately 48 per cent of Brookfield Renewable.
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