How will relative valuation impact the performance of Canada's latest tech IPO?

1 response

  1. John Kassabian says:

    Dear Mark,

    I am an investor in REAL as of Thursday. I have run the numbers and calculated the Enterprise Value of the co in USD (assuming 0.73 exch x 12.4 CAD closing px). My fully diluted EV came to 1.39 billion. Taking the 2017 $276 mil REV and applying 20% 17 growth one gets 331 mil USD run rate, I get a 4.2 multiple of EV/REV. I am assuming you are using the outstanding share count of 86 million in your calculation giving me approx $786 mil USD Mkt Cap and $689 mil USD EV. That spits out a 2.1 multiple. Any reason you don’t use the fully diluted EV? (I backed out cash after IPO and cancelled outstanding debt as they mentioned they would do so in the use of proceeds).

    I am curious to get your opinion of why the IPO, fared poorly, seeing how it was an hotly anticipated issue at 7x oversubscription. Both SHOP and KXS initial two-day trading analysis and the subsequent weeks lead me to believe an off to the races start. Some things I thought of to piece together the price action: I myself thought the IPO was going to take place on Friday. I only found out Wednesday that it would in fact start trading Thurs. I consider myself to be quite in tuned with the financial media and if I missed it and thought it was floating Friday, I am sure the clear majority of investors thought the same thing. Without the retail support, there were no bids to support the stock at the $15 opening price.
    Also, the “price stabilizer” did a poor job allowing the issue to break $13 a share and stay there into Friday close. Why? Negativity surrounding the upcoming earnings results no doubt displaying soft REV may have deterred some? HCG issues and the medias obsession over the past two weeks with the troubled alt lender tainting anything Real Estate related?

    At the end of the day, achieving a $1 billion valuation for a Canadian IPO is a big issue. Perhaps the Canadian market is not as deep as we think and that the valuation discount divide has in fact widened again?

    Curious to hear your thoughts. I will be listening in on the Monday call.



Leave a Reply

Your email address will not be published. Required fields are marked *