Barrick Gold Corp. has closed its $3-billion (U.S.) share sale, and is expected to hand any remaining unsold shares to the underwriters who are liable for them, rather than re-pricing the unsold portion in one fell swoop.
Once a bought deal closes, the underwriters have the option to either collectively cut the price on any remaining shares in order to sell them, or they can all agree to simply take the unsold shares that each dealer is liable for and do what they like with them. Barrick's deal closed on Thursday morning, and the latter option is on the table, according to someone familiar with the transaction.
As of Thursday, approximately 80 per cent of the deal had been sold, according to another person familiar with the deal.
Handing out unsold shares wouldn't preclude the underwriters who are still 'long' Barrick stock from cutting the price in order to remove the stock from their inventory, but it wouldn't be a widespread coordinated effort across the entire syndicate.
While a number of the smaller syndicate members – those who were liable to sell smaller portions of the deal – have already sold what they needed to, the deal has been a tough sell in general. A number of investors balked at the offering because they wanted clarity on the company's corporate governance before buying in, while others are simply too timid to touch gold miners – especially one that has written off $13-billion in 2013.
At this point it is unclear who exactly is liable for the remaining shares, but Bay Street has kept a close eye on GMP Capital. Unlike Royal Bank of Canada and Barclays Capital, the other co-lead underwriters and both of which have big bank balance sheets to support them, GMP has been hit by a slowdown in resource deals and, until recently, struggled to churn out revenues.
However, the independent investment dealer reported its latest quarterly earnings last week, and on the accompanying conference call GMP head Harris Fricker said the firm has more than enough capital to support the Barrick transaction.
In total, the underwriters earned roughly $90-million in fees for selling the stock. Those who have already sold their portions will get the full fee, based on what percentage of the deal they were liable for. Underwriters who are still holding Barrick shares may not earn the full amount. The offering went out at $18.35 (U.S.) per share, and any stock sold at prices lower than that will eat into the revenues earned.