Montreal payments-processing company Nuvei Corp. soared in its debut as a public company Thursday after raising US$700-million in the largest technology initial public offering ever on the Toronto Stock Exchange.
Nuvei stock, which is quoted in Canadian and U.S. dollars, opened at C$45.25 and US$34 Thursday as it began trading on an “if, as and when issued” basis just before formal launch. That’s more than 30 per cent higher than its US$26 issue price. The stock closed at C$45.05, giving Nuvei a market capitalization of C$5.7-billion – and making it one of Canada’s most valuable publicly traded technology companies.
It also cemented chief executive officer and founder Philip Fayer’s status as Canada’s newest billionaire, with a stake worth C$1.5-billion.
“E-commerce and payments are both very hot topics these days given increased growth in demand during the pandemic,” said David Wismer, global head, technology investment banking with BMO Capital Markets, one of the four lead underwriters on the IPO. “Here’s a business that benefits from that digitization and movement online.”
The deal is the fourth successful new Canadian tech issue on the TSX since March, 2019. It follows IPOs by Lightspeed POS Inc., Docebo Inc. and Dye & Durham Ltd. They have all received a boost during the COVID-19 pandemic from a surge in investor interest in companies benefiting from a hastened shift to digital commerce. The S&P/TSX information technology index is up more than 33 per cent this year, led by Shopify Inc., Canada’s most valuable company.
Investor enthusiasm for tech stocks has prompted other domestic software companies to consider going public, including online-learning provider D2L Corp. of Kitchener, Ont., and Montreal telemedicine startup Dialogue Technologies Inc. Both met with investment bankers recently to explore the option.
Meanwhile, the U.S. is on track to have its strongest year for IPOs in six years and the busiest September by deal count since 1999, Bill Smith, CEO of US IPO tracker Renaissance Capital, wrote this week. Snowflake Inc. soared 111 per cent on its first day of trading Wednesday after the company raised US$3-billion in its IPO, a record for a software company. Other tech IPOs are set to follow from Palantir Technologies Inc., Unity Software, Airbnb Inc. and DoorDash.
Nuvei initially set a price range of US$20 to US$22 a share for its IPO last week before increasing the issue price due to strong investor demand during the company’s virtual road-show meetings with investors from Canada, the U.S. and Europe. A source familiar with the deal said interest from Canada gave the deal momentum, and it was eventually 20 times oversubscribed. The Globe is not identifying the source because they were not authorized to discuss details of the deal. Like other previous TSX-only IPOs by Canadian companies Lightspeed POS Inc. and Kinaxis Inc., more than half the stock was purchased by U.S. investors.
Nuvei will get US$625-million in gross proceeds from the offering of 26.9 million shares, while shareholder Novacap, the Quebec private equity firm, is selling US$75-million of its stock.
The deal surpassed the US$631.3-million in gross proceeds raised by previous record holder Ceridian HCM Holding Inc., an HR software firm that went public on the TSX and New York Stock Exchange in April, 2018. The Nuvei offering could eventually top US$800-million if its 14 underwriters, led by Goldman Sachs, Credit Suisse, BMO and RBC Dominion Securities, exercise their right to buy four million shares.
Nuvei, founded by Mr. Fayer in 2003, had 765 employees as of June 30 and 50,000 merchant customers globally across a range of industries with an increasing digital presence, including online retail, online gambling and financial services. Nuvei generated revenue of US$245.8-million in 2019 and posted a net loss of US$69.5-million. It handled US$35-billion of transactions for its customers in the 12 months ended June 30.
Investors who buy in will get a tiny voting interest in the company. Nuvei’s three existing shareholders – Mr. Fayer, Novacap and the Caisse de dépôt et placement du Québec – will have more than 96 per cent voting control of the company after the offering through their multiple voting shares, despite owning 73 per cent of the equity. If any of multiple voting share owners sell any of their stake, those shares would convert to subordinate voting stock with one vote each.
Nuvei is looking to expand in part through acquisitions. In 2019, it nearly doubled its size with a US$872.5-million acquisition of London Stock Exchange-listed payments-services provider SafeCharge International Group Ltd. It’s also buying Dutch company Smart2Pay for €221.6-million (C$345-million).
Nuvei saw year-over-year growth in transaction volumes spike to 28.4 per cent in June, compared to 15 per cent in early 2020. “We believe the COVID-19 crisis will act as a catalyst in further accelerating mobile commerce and e-commerce transactions,” Nuvei said in its prospectus.