The $100-million initial public offering of Shopify Inc. is expected to generate around $5-million in investment banking fees among six firms, including two Canadians.
The exact commission rate payable to its investment bankers will be made public when Shopify files its final prospectus, but it is expected to be around five percent on an IPO of this size. IPOs are generally among the most lucrative of functions investment banks perform, and fees are typically about 100 basis points above what a firm would make in leading a bought-deal financing.
Two Canadian and four American investment banks will split the expected $5-million fee on the Shopify offering. Lead bookrunners garner the bulk of the investment banking revenue (typically around 70 percent), with the other underwriters on the syndicate splitting the remainder.
RBC Dominion Securities Inc. is one of the three leads on the Shopify deal. Based on an expected commission rate of 5 percent, RBC should make about $1.2-million on this transaction. American firms Morgan Stanley and Credit Suisse are the other co-leads. (Shopify has enlisted the help of U.S. investment banks to help sell its stock in the U.S., as it plans to list on the New York Stock Exchange as well as the Toronto Stock Exchange).
Canaccord Genuity Group Inc. is the other Canadian underwriter on the deal, co-managing with U.S. investment banks Pacific Crest Securities Inc. and Raymond James & Associates Inc. Skadden, Arps, Slate, Meagher, & Flom and Stikeman Elliott provided legal advice to the issuer, and Blake Cassels & Graydon and Paul, Weiss, Rifkind, Wharton & Garrison advised the managers on the deal.
RBC was also a lead on the recent Cara Operations Ltd. $230-million IPO which was a resounding success, with demand for the shares outstripping supply by a factor of 20 to 1. Scotia Capital Inc. and BMO Nesbitt Burns Inc. were the other co-leads on the Cara deal. RBC is currently in first place in equity underwriting among Canadian investment banks this year, with 22 percent market share.