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Inside the Market Pot stocks have their highs and lows: How Canadian IPOs fared in 2018

Thomas Hamilton trims cannabis plants in the grow room at Tilray, a medical marijuana grow-op in Nanaimo on Aug. 14, 2014.

John Lehmann

Pot stocks provided investors with wild swings and either big wins or losses in 2018, depending on what you bought, and when. The IPO market was no exception.

The two best-performing Canadian initial public offerings of the past year were cannabis companies. And two of the three worst-performing IPOs came from the sector, as well.

To get a sense of how the IPO stocks performed, Globe Investor focused on 18 IPOs from Canadian exchanges and examined whether they outperformed the broader market, as measured by the performance of the S&P/TSX composite over the period from their debut to the end of 2017. The Globe also looks at returns both from the offering price – which the ordinary retail investor often can't get in on – and from the closing price on the first day of trading.

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Refinitiv provided data to make the exercise possible.

Tilray Inc., one of the wildest IPOs in history, was No. 1, up more than 300 per cent from its offer price and more than 200 per cent from its first-day close. Still, plenty of investors lost: The NYSE-traded stock, which closed 2018 at US$70.54, had a single day of trading in September where it nearly doubled, to US$300, before then losing half its value after multiple trading halts.

Charlotte’s Web Holdings Inc., a Colorado-based, Canadian-listed hemp company, was No. 2, avoiding Tilray’s crazy swings. But Green Organic Dutchman Ltd. and Cannabis Growth Opportunity Corp. were two trailers, each shedding more than half their value from their offering price.

Of the 18 IPOs, eight beat the index from their offering price and 10 beat the market from their closing price on the first day of trading. This unusual result – more outperformers from the first-day close – came because two IPOs that finished down on their first day, Euro Manganese Inc. and Cardiol Therapeutics Inc., went on to recover and outperform the broader index.

These figures – roughly half beating the market, half underperforming – suggest a normal distribution of returns. And that’s been the case in most years of The Globe’s IPO review. In 2017, eight of the 17 IPOs beat the index from their offer price, the price the shares were first sold to the public. And nine beat the market from their closing price on the first day of trading.

PricewaterhouseCoopers, which conducts an annual review of IPOs that includes issues smaller than those in The Globe’s review, said a better-than-expected final quarter of 2018 brought the year’s total of issues to $2.2-billion, less than half of the 2017 total that was boosted by a giant Kinder Morgan Canada offering.

Ceridian HCM Holding Inc., Mav Beauty Brands Inc. and AltaGas Canada Inc., the three largest in the PwC survey by dollars raised, were from three different industries, highlighting a diversity of sectors sometimes not seen in the Canadian IPO market, PwC notes. While Ceridian and AltaGas performed well for investors, Mav Beauty Brands underperformed the TSX by double-digits since its June IPO.

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Canadian Initial Public Offerings, Price Performance, Full Year 2018

Company Symbol IPO Date Offer Price $ $ Close 12/31/2018 12/31/08 Close vs. Offer Price (%) 12/31/08 Close vs. First Day Price (%) Relative return from offer price Industry
Tilray Inc. * TLRY-Q 7/18/18 17.00* 70.54* 314.9% 215.1% 328.0% Health Care
Charlottes Web Holdings Inc. CWEB-CN 8/24/18 7.00 15.17 116.7% 56.4% 129.1% Health Care
Ceridian HCM Holding Inc. CDAY-T 4/26/18 28.31 47.05 66.2% 16.1% 74.6% Technology
Plus Products Inc. PLUS-CN 10/19/18 3.25 4.50 38.5% 13.9% 45.9% Consmr Prod. & Svcs
Minto Apartment REIT MI-UN-T 7/3/18 14.50 18.50 27.6% 17.3% 39.5% Real Estate
Canaccord Genuity Growth Corp. CGGC-UN-NE 9/14/18 3.00 3.50 16.7% 16.7% 27.2% Financials
Altagas Canada Inc ACI-T 10/18/18 14.50 16.22 11.9% 11.9% 18.9% Energy and Power
Pinnacle Renewable Hldg Inc. PL-T 1/30/18 11.25 12.00 6.7% -0.9% 16.9% Industrials
Global Real Estate & E-Commerce GEC-UN-T 10/25/18 10.00 9.00 -10.0% -5.8% -6.0% Financials
Cardiol Therapeutics Inc. CRDL-T 12/20/18 5.00 4.45 -11.0% 7.2% -12.3% Health Care
Euro Manganese Inc. EMN-X 9/25/18 0.25 0.22 -12.0% 2.3% -0.6% Materials
Sarment Hldg Ltd. SAIS-X 8/21/18 3.15 2.75 -12.7% -16.7% -0.6% Consmr Prod. & Svcs
BSR REIT * HOM-U-T 5/18/18 10.00* 8.00* -20.0% -16.7% -8.6% Real Estate
MAV Beauty Brands Inc. MAV-T 6/28/18 14.00 10.68 -23.7% -21.5% -12.2% Consmr Prod. & Svcs
IPL Plastics Inc. IPLP-T 6/21/18 13.50 10.00 -25.9% -24.8% -13.6% Consmr Prod. & Svcs
The Green Organic Dutchman TGOD-T 5/2/18 3.65 2.46 -32.6% -36.8% -24.3% Health Care
Steppe Gold Ltd. STGO-T 5/22/18 2.00 0.85 -57.5% -56.4% -46.2% Materials
Cannabis Growth Opportunity CGOC-CN 1/26/18 2.50 0.97 -61.2% -58.7% -49.4% Financials

Source: Refinitiv and David Milstead

* in U.S. dollars

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