The Canadian tech IPO with an unusual ending, E Automotive delists from the TSX after going public at a valuation of $1 billion

E Automotive Inc. EINC-T is ending its adventure as a public company with a whimper rather than a bang, with plans to delist from the Toronto Stock Exchange just seventeen months after its shares began trading.

E Automotive operates an online auction platform for car dealerships and is better known as E Inc. The company went public in November 2021 with a valuation of $1 billion, but two weeks later the Nasdaq Composite index peaked and it was ahead misery, especially for small businesses. and medium-sized technology companies since.

E Automotive went public at $23 a share, raising $135 million – only part of the entire company was sold to public investors – and the stock closed at $3.05 on Monday. Despite speculation that deeply discounted tech stocks could be acquired cheaply, E Automotive’s decision looks more like a disappearance, with plans to simply walk away from the TSX because its low share price could only make things worse.

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In a statement Tuesday, management said it had considered alternatives, including an acquisition, but ultimately determined that the benefits of a delisting “outweighed the benefits of a private transaction in the company’s current circumstances.” The company did not immediately respond to a request for comment.

After the delisting, existing shareholders will continue to hold their shares — but they won’t be traded anywhere. To address this liquidity issue, E Automotive will initiate a stock repurchase program to repurchase up to $7.5 million of its existing shares at a price of $3.50 each, giving some shareholders a way out.

Existing shareholders have already pledged their support for the delisting. E Automotive is controlled by Intercap Equity Inc., a Toronto-based merchant bank that owns 72 percent of the company, and Intercap is backing the move. The holders of approximately 59 percent of the remaining shares have also given their approval, the company said in a statement.

E Automotive’s association with Intercap made it attractive to potential public investors during the IPO, which was led by Canaccord Genuity, CIBC World Markets and National Bank Financial. Intercap previously backed Docebo Inc., which makes online training software for employees, and Docebo’s shares had risen to about $100 a share from $16 at the time of the IPO. (They’ve since lost half their value and are now trading around $50 each.)

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So the hope was that E Automotive would repeat Docebo’s outstanding run.

Reality: It was anything but. The tech crash has been particularly cruel to companies that aren’t making money, and E Automotive is in that camp, losing $63 million in 2022 and $23 million in 2021.

The sector-wide correction has hurt most Canadian tech companies that have gone public during the pandemic boom. While some have performed well — Magnet Forensics just sold to a private equity firm for 160 percent more per share than its IPO price — far more have struggled. BBTV Holdings Inc. is 98 percent below its IPO price, and Q4 Inc. is down 68 percent since its IPO.

In its rationale for the delisting, E Automotive explained that the shareholder base has changed dramatically since the IPO. Institutional shareholders made up over 90 percent of the buyers in the IPO, but most sold quickly, with the majority exiting before E Automotive had reported a single quarter as a public company. To date, 95 percent of institutional investors who bought into the IPO shares have sold, the company said.

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With so many major shareholders already exiting and only 10 percent of the company’s outstanding shares available on the open market, E Automotive’s shares are rarely traded. The company felt it would be better to just go public to avoid costs like listing fees.

“Should market conditions and company performance improve, the company may seek to list its shares again in conjunction with investments from institutional investors in the future,” E Automotive said in its statement.

With files by Sean Silcoff