Montreal online payments processing company Nuvei Corp. dropped plans to go public on both the Toronto and New York stock exchanges after deciding it didn’t need a U.S. listing to generate enough investor interest for Canada’s biggest-ever technology IPO, its CEO says.
“We didn’t see a difference between dual-listing right away or going Canada only, so we opted for [a TSX listing] only,” said Nuvei chief executive officer and chairman Philip Fayer in an interview Wednesday. On Tuesday, Nuvei completed its initial public offering, with U.S. investors buying more than half of the US$805-million worth of stock at US$26 a share.
“Certainly the option to look at a U.S. listing in the years ahead is available, but right now there’s really no need," Mr. Fayer said. "It’s no longer the fact that you have to go to [list in the] U.S. from a valuation or a market depth perspective.”
It’s a big vote of confidence for the TSX, which has already seen tech issuers raise more equity in 2020 – well over $4.5-billion – than in any year since the 2008-09 financial crisis.
It’s also the fourth successful tech IPO on the exchange since March, 2019, and at least the third TSX-only tech listing in recent years – after Kinaxis Inc. in 2014 and Lightspeed POS Inc. in 2019 – to draw a majority of buyers from the United States.
“It really shows investor demand in technology in Canada and the quality of names coming to our marketplace,” said Dani Lipkin, director of global business development with TSX parent TMX Group Ltd. “We’re seeing more global interest in our innovation franchise.”
The TSX is often seen as a junior exchange for fast-growing, globally minded Canadian innovators eyeing deep capital markets in the U.S., where investors are more comfortable investing in highly valued tech companies. Ottawa’s Shopify Inc. listed on both the NYSE and TSX in 2015 but more than 90 per cent of trading happens in New York. More than 98 per cent of trading in dual-listed Ceridian HCM Holding Inc., managed out of Toronto, is on the NYSE.
Nuvei has had heavy Canadian support since shifting its focus five years ago. Mr. Fayer, 42, started his first payments company in his early 20s, abandoning business studies at Concordia University. By 2015, Nuvei, then known as Pivotal Payments, provided payment processing services to tens of thousands of small and medium-sized businesses through in-store terminals and online.
But as software companies increasingly entered the payments arena, Mr. Fayer decided to focus on the fast-growing e-commerce and digital payments business. He targeted globally oriented merchants in industries including financial services, travel, online gambling and e-commerce that had to navigate the complexities of dealing with multiple payment options and currencies around the world.
Nuvei today processes US$35-billion in transactions in more than 200 markets, managing 450 payment methods and about 150 currencies on its platform. Online transactions account for 71 per cent of the total, up from less than 30 per cent five years ago.
In late 2017, Quebec private equity firm Novacap and pension giant Caisse de dépôt et placement du Québec bought control of Pivotal from early investor Goldman Sachs in a deal valuing it at $525-million. The pair invested hundreds of millions more in 2019, helping to finance Nuvei’s purchase of London Stock Exchange-listed payments service provider SafeCharge International Group Ltd. for US$872.5-million, nearly doubling the company’s size.
The company continues to eye further acquisitions. “We have a very deep pipeline” of potential targets globally, Mr. Fayer said.
Novacap’s $350-million investment is the biggest in its 39-year history, and its paper gain, now more than $1.4-billion, is its largest to date. “We pressed the ‘I Believe’ button with Phil … and we’re super happy," Novacap senior partner David Lewin said.
Investors have responded well to Nuvei, bidding up the stock, which is quoted in Canadian and U.S. dollars, by 38 per cent since its issue last week at US$26 a share. That continues a trend in which Canadian tech companies, including Shopify and Kinaxis, command rich valuations compared with their U.S. peers – reversing a previous trend in which TSX-listed technology companies traded at a discount.
Information technology stock now accounts for more than 10 per cent of the S&P/TSX Composite Index, about three times the level it stood at early the last decade, after the implosion of giants Nortel Networks and BlackBerry.
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