Canada's oldest company returned to the public markets with a whimper rather than a bang on Tuesday, with its newly issued stock slumping on the first day of preliminary trading.
Hudson's Bay Co. sold 21.5 million shares at $17 each in a combination initial and secondary offering, raising about $365-million. The stock traded for the first time on Tuesday, on an "if, as and when-issued" basis, which is early trading before the share sale actually closes next week.
After rising slightly above the issue price to about $17.07 early in the day, HBC stock slipped as low as $16.40 before closing at $16.75.
The lead underwriter, RBC Dominion Securities, was by far the biggest buyer of shares on the first day of trading, accounting for about three-quarters of all the shares purchased. Typically, underwriters will buy shares right after an initial public offering starts trading to help support the price.
The initial sale price was already lower than what the company had planned. In the early marketing of the sale in October, the suggested price was set at between $18.50 and $21, with the goal to raise about $400-million. Most of the money raised will be used to pay down debt, the company said in its IPO filings.
"There was no real demand for the shares, and it is all about supply and demand," said Barry Schwartz, vice-president of Toronto investment management firm Baskin Financial Services Inc. "Nobody expected a first day pop."
Still, Mr. Schwartz said, the first day of preliminary trading is no indication of the real value of the shares. That will become clear over time, he said, as HBC begins to deal with the new competitive retail environment in Canada. That changed scene will include U.S. discount retailer Target Corp., which is preparing to enter the Canadian market.
"The numbers have to do the talking," Mr. Schwartz said. "We will see if HBC is able to maintain level sales with the onslaught of U.S. retailers that are about to expand dramatically." He said he cannot judge what HBC is really worth until it "gets a couple of years under [its] belt."
HBC, which began life as a British-based fur trading company in 1670, has changed hands several time in recent decades. It last traded publicly in 2006, but was turned into a private company by U.S. investor Jerry Zucker. In 2008 it was bought by NRDC Capital Partners LLC, whose owner Richard Baker, is now the chief executive officer. After the IPO, NRDC will still own about 80 per cent of the company.
As well as the Hudson's Bay stores, the company also owns the Lord & Taylor department store chain and the Home Outfitters chain. The Bay has 90 stores and about $2.2-billion in annual sales, while Lord & Taylor has 48 stores and $1.4-billion in sales. Home Outfitters has 69 stores and $300-million in sales
An HBC spokeswoman said Tuesday that the company does not comment on its share price.