Farmers Edge Inc., a Winnipeg-based agricultural technology provider, is boosting the size of its initial public offering to $125-million on the back of heavy investor demand.
The company, which is controlled by Fairfax Financial Holdings Ltd., filed to go public in early February and hoped to raise $100-million. After marketing the deal for two weeks, the company has boosted the IPO size by 25 per cent and priced the shares at $17 each, which is at the top end of the deal’s marketing range.
Farmers Edge was able to upsize the IPO because investors put in orders for more than 10 times the original deal size, according to someone familiar with the transaction. The Globe and Mail is not disclosing the source because they are not authorized to speak publicly about the matter.
Farmers Edge was an early Canadian agricultural-technology leader, and uses data science and AI-powered software to help farmers improve yields. Like many of its technology-based peers, the company decided to go public because Canada is in the midst of an IPO craze.
Starting midway through 2020, a number of IPO issuers have seen their deals met with intense investor enthusiasm. Montreal-based online payments company Nuvei Corp., for one, set out to raise US$600-million in September but bumped its final haul to US$805-million.
Many issuers have also seen their shares soar once they started trading. Shares of Dye & Durham Ltd., a consolidator of software providers for legal and business professionals, have more than quadrupled since listing at $7.50 on the Toronto Stock Exchange last July.
The current deluge marks a major reversal. From 2009 to 2020, just 12 Canadian tech IPOs raised $50-million or more, and as of early last year, Canadian tech companies were often avoiding or delaying going public because private backers were happy to invest at attractive valuations. That’s now flipped, and public markets are just as competitive, if not even more lucrative.
However, there is growing concern that public investors could quickly turn on growth stocks, especially if bond yields and interest rates start to rise in the United States. Many of the companies that are going public lose a lot of money, and Farmers Edge lost $68-million in the nine months ended Sept. 30, on top of a $118-million loss in 2019.
While the IPO craze is continuing, some recent deals have seen more modest demand, suggesting the recent euphoria has some limits. Both DRI Healthcare Trust and ABC Technologies Holdings Inc., an auto parts maker, were able to complete their offerings in the past few weeks, but DRI priced at the lower end of its marketing range and ABC had to slash its offering size by 60 per cent as well as price its shares below its marketing range.
Farmers Edge raised private capital in the mid-2010s from Silicon Valley-based Kleiner Perkins Caufield & Byers and Toronto-based Osmington Inc., which is controlled by David Thomson. (Woodbridge Co. Ltd., the Thomson family holding company, owns The Globe and Mail.)
Fairfax bought Kleiner Perkins’s stake in 2016 and has since gained majority control of the company.
National Bank Financial and CIBC World Markets served as co-lead underwriters for the IPO.
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Tim Kiladze