“No, higher,” Elon Musk told investment bankers ahead of Tesla‘s (NASDAQ:TSLA) IPO in 2010, balking at the $15 offering price that they recommended. Most company executives defer to the bankers that they’ve hired when it comes to valuation matters, but Musk needed as much capital as possible to fund the electric-car maker’s burgeoning operations. The eccentric billionaire insisted on an offering price of $17, threatening to call off the deal unless he got his way — and won.
The anecdote illustrates the opposing forces at play in traditional IPOs, where companies want higher prices in order to maximize the deal’s proceeds but investment bankers prefer to engineer a pop on the first day to reward the (predominantly institutional) investors that buy in. It’s a delicate balance, one that has only grown more contentious over time, which is in part why many companies have been increasingly exploring alternative paths to the public markets in recent years, such as direct listings or special-purpose acquisition companies (SPACs).
The traditional IPO process has come under fire in recent years. Image source: Getty Images.
In the wake of Snowflake‘s (NYSE:SNOW) huge splash in the public markets today — with shares more than doubling from the offering price of $120 — Unity Software is preparing its own debut at an opportune time. Investors can’t get enough of hot tech IPOs, making it a rather favorable environment to go public. But this won’t be just like any other IPO; Unity CEO John Riccitiello is borrowing a page out of Musk’s playbook.
Greater influence over the offering price
Unity updated its prospectus today with a new pricing range, expecting the deal to price at $44 to $48 per share, up from the previous estimated range of $34 to $42. That would put the game-engine maker’s valuation at $11.6 billion to $12.6 billion, based on the 263.4 million shares that will be outstanding after the offering.
Here’s the kicker: Riccitiello and his team have secured greater control over how the deal prices and Unity will also have more say over which investors receive shares, according to CNBC and TheFinancial Times. Unity and its underwriters will reportedly try a novel bidding system where institutional investors submit indications of interest (IOI) that specify how many shares they are interested in purchasing and at what price, and the prospective investors can submit numerous bids at various prices.
Unity makes the most popular mobile game engine. Image source: Getty Images.
Based on those bids, Unity will then pick the offering price and all investors who submitted bids above that price would be allocated shares in the primary market, according to FT. Additionally, Unity will have some influence on how those allocations are distributed to investors. The updated prospectus filed today does not mention this bidding process at all.
Alphabet subsidiary Google used a similar modified Dutch auction process when it went public in 2004.
A smaller pop?
The traditional IPO process is shrouded in mystery for most retail investors. Normally, investors submit an IOI to tentatively purchase some number of shares. The bankers then use those IOIs, along with other inputs, to help set a price based on the aforementioned balance. Once the IPO prices, prospective investors must confirm that they are still interested based on the new pricing information. Shares are then allocated, typically skewed toward institutional heavyweights, and allocations are not guaranteed.
While IPO investors like to see massive Snowflake-esque pops on the first day of trading — who doesn’t like doubling their money in a day? — companies often view that as money left on the table since those pops indicate that there was sufficient demand for the IPO to command a higher price. While the market optics are nice, issuers would rather bolster their war chests and use that money to actually operate.
Unity’s unique bidding process is designed to provide greater transparency to a notoriously opaque process, theoretically justifying a higher IPO price that might also limit the potential pop on the first day of trading. Unity’s IPO is scheduled to price tomorrow.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
