Sleep Country Canada Holdings Inc. closed 5 per cent lower than its offering price on its first day of trading on the Toronto Stock Exchange since being taken private seven years ago.
The country's largest mattress retailer, which priced its shares at $17 under the ticker "ZZZ," opened Thursday at $17.10, peaked at $17.20 and stooped down to a low of $16.25. It closed the day at $16.15. It issued 17,650,000 shares, raising about $300-million, with the possibility of more if the underwriters – led by TD Securities and BMO Nesbitt Burns – exercise their overallotment options for an additional 15 per cent of the offering at the same share price. It was the third most active company on the TSX by trading volume at roughly five million shares.
The Toronto-based company, which operates 215 stores in eight provinces in Canada, initially priced its IPO at $200-million at $14 to $16 a share in a June 23 filing but sought 50 per cent more on July 9.
After five years as a publicly traded income fund, Sleep Country was acquired and taken off the TSX in 2008 by Toronto-based private equity firms Birch Hill Equity Partners Management Inc. and Westerkirk Capital Inc. for $22 a share, for a total of $356-million. At the time, the company suffered setbacks at its 200 Canadian and 46 U.S. stores during a slumping housing market.
Sleep Country could not be reached for comment.
Sleep Country is staring at a $1.5-billion mattress industry – nearly a quarter of which it controls – that is facing an upheaval of sorts. Small and emerging players are tightening the screws on competition in a market that has traditionally been dominated by the brick and mortars – Leon's, Sears, and the Brick, among others. But now new startups including New York-based Casper and Endy Sleep, Canada's largest direct online-only mattress store that dubs itself the "Uber of mattresses," is trying to grapple some market share away by offering more cost effective beds by killing middle-man and commission costs.
"What's disrupting them [traditional mattress retailers] is the drive to purchase online," said Rajen Ruparell, Endy's largest investor and founder of Citydeal, which was bought by Groupon. "The market will continue to grow but it's a very stable business. Mattresses are generally needs-driven; it's usually linear to population growth, so it's really a market share battle between the retailers, where the biggest dent to that market share is going to be from online players."
The IPO is just one of several filed over the first two weeks of the month. Mining company TMAC Resources Inc., alternative lender Crown Capital Partners and special acquisition company Alignvest Acquisition Corp. all began trading this month. In the same span, several companies either shelved their own public appearances or were purchased before filing. CHC Student Housing Corp. shelved its debut, and Shred-it initially planned a $600-million IPO before being purchased by Stericycle for $2.3-billion (U.S.). Com Dev International plans to take subsidiary exactEarth public and raise $80 million, while Spin Master Corp. is seeking $220-million (Canadian) in its own offering.
Sleep Country is not first Canadian IPO to stumble in its first day of trading. TMAC Resources dropped 5.8 per cent on July 7, while Crown Capital Partners slumped 8.2 per cent on July 9.
Other Canadian IPOs fired out of the gate, but have since slid. Montreal-based DavidsTea Inc., which priced its shares at $19 (U.S.) and saw a close of $27 on its first day on the Nasdaq on June 5, fell 25 per cent nearly two weeks later. It traded around $19.5 on Thursday.