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A person enters the Shopify office in Toronto on Feb. 12, 2020.

Chris Donovan/The Globe and Mail

Royal Bank of Canada landed a minor role, and a small share of the financial benefit, in Shopify Inc.’s $2-billion capital raise this week – a deal dominated by Wall Street banks.

Goldman Sachs and Citigroup co-led the Canadian technology giant’s two offerings and stand to earn more than 80 per cent of the combined US$27.3-million in discounts and commissions, with Credit Suisse claiming most of the rest. Shopify raised US$800-million in convertible senior notes and sold 1.1 million subordinate voting shares at US$900 apiece for gross proceeds of US$1.79-billion.

According to regulatory documents filed Thursday, RBC, which was added late as a co-manager on the deal, was only allocated US$32-million of the debt instruments and 47,143 of the shares to distribute to clients. That means it stands to earn about 4 per cent of the commissions, or US$1.14-million. That could rise slightly if the underwriters exercise their option to buy an additional US$120-million of the notes and 165,000 shares.

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This is the first time RBC has played a role in a Shopify financing since playing a bit role in the company’s May, 2015, initial public offering and its subsequent share offering in August, 2016. Shopify, which trades on the Toronto and New York stock exchanges, typically uses Wall Street banks for the vast majority of its financing needs, sometimes bringing in Canadian underwriters as bit players in underwriting syndicates. Of its seven previous share offerings dating to its IPO, Canadian-based underwriters have earned less than 10 per cent of the US$86.9-million in combined underwriting commissions and discounts.

The lack of Canadian presence in Shopify’s financing pursuits has rankled some on Bay Street, though the company is relatively undercovered by Bay Street analysts, underweighted by Canadian fund managers and underappreciated by domestic equity strategists, The Globe and Mail reported this year. Several Canadian fund managers stated this year that they liked Shopify but found the stock too pricey. It continued to appreciate in value, along with other technology companies, fuelling concerns that the sector – and stocks in general – may be due for a correction after several sharply lower days for tech stocks in the past two weeks.

Shopify’s subordinate voting stock has traded lower than the stock offering price in the past two days. It opened at US$858.86 on the NYSE Thursday, down 3 per cent from Wednesday’s close.


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