Montreal-based tea shop operator DavidsTea Inc. blasted out of the gates in its U.S. stock debut.
The stock, which started trading under the ticker symbol DTEA on the Nasdaq on Friday, closed at $27 (U.S.), an increase of 42 per cent.
The company sold five million shares at $19 apiece, a dollar above the range it had indicated earlier in the week. The company raised $97-million in the offering but an over-allotment option could see the company raise an additional $14.5-million. The company plans to use part of the proceeds to pay back debt.
The stock sale was led by Goldman Sachs Group Inc., JPMorgan Chase & Co. and Merrill Lynch & Co. Inc. The deal was co-managed by BMO Nesbitt Burns Inc. and William Blair & Co.
DavidsTea opened its first loose leaf tea shop in Toronto in 2008. It competes against smaller independents and bigger chains like Teavana, which is owned by Starbucks Corp. It has 136 stores in Canada and 25 in the U.S. and plans to open an additional 40 by year end.
DavidsTea is the second Quebec-based firm to go public this week. On Wednesday, shares in Montreal media company Stingray Digital Group Inc. surged almost 18 per cent on its first day of trading on the Toronto Stock Exchange.
Unlike fellow Canadian company Shopify Inc., which listed in the U.S. and Canada last month, DavidsTea didn't list in its home market even though most of its operations are in Canada. The decision not to list in Toronto is part of the reason enthusiasm over the IPO was muted in Canada, said Elliot Fishman, director of U.S. and international trading with ScotiaMcLeod in an interview.
"We haven't had very many inquiries about the IPO. It's definitely not generating the buzz of a Tim Hortons, where a lot of advisers wanted the name for their portfolios."
Sylvain Toutant, CEO of DavidsTea, said deciding where to list was something the company "really debated," but they settled on the Nasdaq for "liquidity" reasons, the expectation that a lot of its growth will come from the U.S., and the exposure the American listing gives the company.
"To be listed on the Nasdaq is a fantastic branding opportunity. ... Times Square being all [lit up in] David's Tea colours. It's absolutely amazing."
As for whether the company could eventually seek a dual listing in Canada, he said, "We haven't shut the door on that for the long term."
Mr. Toutant became CEO of the tea company in May, 2014, but is a former coffee man – he used to be the chief operating officer at VanHoutte. He said it was his teenaged sons who put a bug in his ear about tea and he "quickly converted." Jumpy Monkey is his favourite brew. "It gets me going in the morning," he quipped.
A few of DavidsTea's major shareholders took money off the table in the IPO.
Herschel Segal, the company's 84-year-old co-founder (and founder and former CEO of of clothing retailer Le Chateau Inc.) sold a few hundred thousand shares but still owns 53 per cent of the company post-IPO; 34-year-old David Segal, second cousin of Herschel and the person whom the company is named after, is cutting his stake to 6.6 per cent from 11.3 per cent.
Highland Capital Partners – a Boston-based venture capital firm that invested $13-million (CAD) in the firm in 2012 through its Highland Consumer Partners fund – is cutting its stake from 20.5 per cent to 14.7 per cent.