US PE-backed IPOs outperform, VC-backed and CDN PE-backed IPOs underperform

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By CPE Analytics

During the first seven months of 2017, three VC-backed and four PE-backed Canadian companies went public by way of initial public offering (IPO) on the Toronto Stock Exchange (TSX) or currently on the New York Stock Exchange (NYSE), raising CDN $1.33 billion in aggregate gross proceeds from treasury and secondary offerings.

How well are they performing now?

As of July 31, 2107, VC-backed companies were all trading under their offering prices, with Zymeworks Inc. (TSX/NYSE: ZYME) leading the pack and having lost almost half of its stock value. Freshii Inc. (TSX: FRII) and Real Matters Inc. (TSX: REAL) lost 12% and 23% in stock value respectively.

With disappointing performance by Zymeworks, recent “biotech euphoria” driven by huge biotech deals such as the US $55 million financing by Milestone Pharmaceuticals, $36 million financing by PreciThera and US $68 million financing by Repare Thearapeutics, may need a reality check.

It is worth noting that Zymeworks IPO was largely driven by existing investors/shareholders which bought 3,017,690 (67%) of the 4,500,000 common shares being offered.

Although based on a very small sample, we have a very interesting and opposite trading phenomenon for PE-backed IPOs: US PE backed IPOs are outperforming while Canadian PE backed IPOs are lagging and trading below offering price.

TriWest Capital Partners backed Source Energy Services Ltd. (TSX: SHLE) and ARC Financial backed STEP Energy Services Ltd. (TSX: STEP) have lost 29% and 6% stock value since their IPOs.

US PE-backed IPO are the stars and bright spots for Canadian PE IPOs. Bain Capital backed Canada Goose Holdings Inc. (TSX/NYSE: GOOS) and CCMP Capital Advisor backed Jamieson Wellness Inc. (TSX: JWEL) have seen their stock price trading up by 40% and 17%.

Download PDF version of the table chart HERE